HMRC announced on Friday that it will not charge the 5% late payment penalty on self assessment tax which is not paid by 3rd March.
Previously it was announced that there would be no late filing fee, which is normally £100, as long as tax returns were submitted by 28th February. This still applies but in addition HMRC will not apply the 5% late payment penalty as long as tax payers have either paid their tax in full or set up a Time to Pay arrangement by midnight on 1st April.
This will help many of those who are self-employed and have seen their income drop over the last 12 months. Being able to delay payment until 1st April or arranging to pay the tax due over the next 11 months will go some way to helping to manage this. In addition it gives a little extra time to assess how much tax may be due on income during the current tax year and apply for a reduction in the Payment on Account to compensate for lower profits.
However interest at 2.6% will still be payable on the tax owing. The 5% late payment penalty will be applied from 2nd April if no payment and no arrangement has been made and a further penalty will be applied in August 2021 and February 2022 if tax is still outstanding.
Payment on Account
A Payment on Account made on 31st January and 31st July each year is an advance payment towards the tax due on profits which will be payable by 31st January the following year. So if you expect your profits to be reduced for the current tax year you may be able to reduce your Payment on Account payable now and on 31 July 2021.
Apply for Time to Pay or Reduce Payment on Account
You can apply for a reduction in Payment on Account and for the Time to Pay arrangement by logging into your tax account through the Government Gateway.
Find out More
Details of this additional help with paying self assessment tax can be found on HMRC website.