The UK tax authority has for the first time waived penalties for late filing of personal tax returns, after professional bodies warned that an additional 1.5m people risked missing this year’s deadline because of the pandemic.
Some 950,000 people were late filing their returns for the 2018-2019 tax year. But HM Revenue & Customs has been warned that 2.5m will miss the deadline for 2019-2020 self-assessment returns, which are due on January 31.
HMRC has insisted that people will still have to pay their self-assessment tax on time and said anyone who had not completed their return should initially pay an estimated amount based on their income.
But the authority said it would not charge penalties on 2019-20 self-assessment returns submitted after the January 31 deadline, as long as they were filed by February 28.
It is the first time in the 24-year history of self-assessment that late-filing penalties have been waived. In normal years, failure to submit a tax return on time triggers an immediate £100 fine, with further charges kicking in if the delay extends to three months or more.
The move comes after a campaign by accountancy and tax professional bodies, which have argued that advisers and taxpayers would struggle to meet the deadline this year because of the impact of Covid-19.
The groups have lobbied for months for either an extension to the deadline or a waiving of penalties. As recently as last week HMRC had resisted their pleas.
HMRC said it expected that 12.1m people would be required to file a 2019-20 self-assessment tax return and that 8.9m had already done so. Research by the Association of Chartered Certified Accountants UK estimates that around 2.5m people, or three times as many as last year, are likely to file late this year.
“We want to encourage as many people as possible to file their return on time, so we can calculate their tax bill and help them if they can’t pay it straight away,” said Jim Harra, HMRC chief executive.
“But we recognise the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by January 31.”
Annual interest of 2.6 per cent will still be charged from February 1 on any outstanding liabilities. Late payment attracts a fine of 5 per cent of the tax unpaid at 30 days, six months and 12 months after the deadline.
Helen Thornley of the Association of Taxation Technicians, a professional body, said taxpayers unable to file by January 31 should make an estimated payment after taking advice from their accountant to reduce the interest bill and “certainly take steps to avoid the surcharges levied on tax unpaid by March 3”.
Taxpayers who cannot afford to pay their tax bill on time can apply online via HMRC’s website to spread their bill over up to 12 months — on up to £30,000 of tax owed. But they will need to file their 2019-2020 tax return before setting up such an arrangement.
HMRC confirmed that 42,000 individuals had so far taken up the offer to spread their liabilities in this way — covering tax totalling almost £130m.Phil Hall, head of public affairs & public policy at the Association of Accounting Technicians said: “During a time of unprecedented challenge, this decision will help millions of taxpayer.” He added the move “also relieves some of the pressure” on accountants “who are doing their utmost to support individual taxpayers and businesses large and small”.