Self-assessment payment penalty deadline extended
Mar 10, 2021
In some good news from HMRC, the decision has been taken to extend the late payment penalty deadline for self-assessment (SA) taxpayers until 1 April. Normally speaking, if you still owed any unpaid tax on 3 March, then you would have had to pay a 5% late payment penalty.
This extension has been granted because of the ongoing impact of Covid-19. The extra time is either for you to pay your self-assessment tax, or to set up a payment plan – a ‘Time to Pay’ arrangement, which allows you to pay in monthly instalments up to January 2022. This may be a particularly attractive option if you chose to defer payment of your July 2020 payment on account until 31 January 2021.
Provided you don’t owe more than £30,000 in tax, then you can set this up online yourself without having to contact HMRC directly. So far more than 97,260 taxpayers have set up a self-serve Time to Pay arrangement online, totalling more than £36m.
You will need to do this by midnight on 1 April to avoid being charged the 5% late payment penalty. However, do be aware that daily interest charges at a rate of 2.6% are still being applied on any unpaid self-assessment tax from 1 February 2021. This will continue until your bill is paid in full, so the sooner you can pay it off the better.
The 5% late payment penalty fee will still be charged after 1 April, and again after six months and 12 months.
Paying your Class 2 National Insurance contributions through a Time to Pay arrangement
If you’re self-employed and pay Class 2 National Insurance contributions (NICs), you will usually pay them as part of your annual balancing payment.
If you have chosen to pay your tax bill through a Time to Pay arrangement, your deferred July 2020 payment on account will be cleared first, to minimise the interest you will be charged.
This could result in your 2019/20 Class 2 NICs being paid after their due date of 31 January 2021, which could then have a detrimental effect on certain contributory benefits claimed.
If this affects you, please let us know. We can notify HMRC, who may be able to allocate monies you’ve already paid for your 2019/20 SA liabilities against the Class 2 NICs that you owe. You may incur a small amount of interest if they do this, but your contributory benefit claim should be protected.
If you’re concerned about being able to pay your outstanding self-assessment tax please talk to us about your options, and we will endeavour to assist with talking to HMRC.