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Business Services  •  Business Tax  •  Personal tax

HMRC Time to Pay Update – How to avoid the 5% penalty

By RJP LLP on 17 March 2021

HMRC has announced that self-assessment taxpayers will not be charged the initial 5% late payment penalty provided they either pay their tax due or make a time to pay arrangement by 1‌‌ April 2021.

The payment deadline for the balance of 2020 self-assessment tax is 31 January 2021 with interest being charged from 1 February 2021 on any amounts outstanding. If the tax remains outstanding on 28 February, HMRC also charges a 5% penalty on the amount outstanding.

Whilst the deadlines have not changed, this year, due to the impact of COVID 19, HMRC is giving taxpayers more time to pay with the option to set up a payment plan. The self-serve online time to pay facility (available for taxpayers with tax owing of up to £30,000) enables taxpayers to spread the cost of their tax liabilities over monthly instalments until January‌‌ 2022.

Provided a payment plan is in place by midnight on 1‌‌ April 2021 HMRC has advised that the 5% late payment penalty will not be charged.

It is still necessary to submit outstanding 2020 self-assessment tax returns by 28 February 2021 to avoid the late filing penalty.

Note - Time to Pay arrangements cannot be made by your accountant or tax adviser, although they can advise you on how to approach HMRC and what to expect.  To contact HMRC for help and support, call 0300‌‌ 200‌‌ 3822 or visit https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments.

Review our earlier article to understand what you will need to hand and what to expect when you contact HMRC regarding Time to Pay: What to expect from HMRC Time to Pay.

For help and advice regarding your tax liabilities please contact partners@rjp.co.uk

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30 April 2021 - ATED return deadline

If you own UK residential property valued at £500,000 or more in a limited company, the next deadline for filing ATED returns is 30 April 2021. This is needed even if there is no tax to pay. Be on time to avoid a penalty.