Good news for struggling Self Assessment taxpayers - the filing deadline has effectively been extended. The new deadline is the 28 February giving millions an extra month to organise their tax affairs. The official deadline of 31 January is still in place. However, HMRC will not fine anyone for late tax returns along as they are completed by 28 February.

With days counting down, an estimated 5.7 million people had still not filed their tax returns. Almost as much as the 6.5 million who already have. Until the announcement, millions were facing late payment fines starting at £100.

Furthermore, anyone struggling to pay their Self Assessment tax in time won't receive a penalty. As long as they pay in full, or set up a Time to Pay arrangement by 1 April.

As stated by HMRC it is still better to file by the original deadline, as after 1 February interest will accrue.

So what is the reason for extending late payment penalties? And, why is there a delay in late filing penalties? As no surprise to anyone, Covid -19 and the effects of the pandemic are the reason.

As stated by Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary:

"We know the pressures individuals and businesses are again facing this year, due to the impacts of COVID-19. Our decision to waive penalties for one month for Self Assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty."

This was echoed by Lucy Frazer, Financial Secretary to the Treasury, who said:

"We recognise that Omicron is putting people under pressure, so we are giving millions of people more breathing space to manage their tax affairs. Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead."

Normally all returns filed after 31 January will be charged with late filing penalties. There is still a chance after that to have this penalty cancelled. A taxpayer will have to give an excuse for filing late (deemed reasonable by HMRC) to have this waived.

But, this is the second consecutive time HMRC has extended late filing charges by one month. As of yet, it is unclear whether this will continue in the future. It may be dictated by the effects of the pandemic.

Also, any unpaid tax outstanding on 3 March would usually incur a 5% late payment penalty. This fee is waived if a Self Assessment taxpayer pays or sets up a payment plan by midnight 1 April.

Further breathing space has been given to those struggling financially. The option is given for a business or individual to spread their payments over time.

HMRC has set up a Time to Pay service for Self Assessment taxpayers with a tax bill of up to £30,000.

This can be set up after the tax return has been filed. For further information for anyone in financial hardship, or requiring a Time to Pay arrangement, visit the gov.uk website. Time to Pay arrangement can be set up by calling the Self Assessment Payment Helpline on 0300 200 3822.

Grants and Covid-19 Support Schemes

The tax return will include earnings during the pandemic between 2020 and 2021. Furthermore, grants and Covid-19 support schemes are taxable. Taxpayers or accountants will need to declare this on their self-assessment up to 5 April. This includes:

  • Self-Employment Income Support Scheme
  • Coronavirus Job Retention Scheme
  • Self-isolation payments,
  • Local authority grants
  • Eat Out to Help Out scheme and related schemes.

However, you do not need to report a COVID-19 support payment if it was a welfare payment made by a council to help an individual with things like council tax payments or housing benefit.

There are several key dates to remember for self-assessment:

  • 31 January – Self Assessment deadline
  • 1 February – interest accrues on outstanding bills
  • 28 February – Online deadline for filing late tax returns. After this, a late filing penalty will be added.
  • 1 April – Deadline to pay outstanding tax. Also the deadline for setting up a Time to Pay arrangement. If not a late payment charge is added.

Although late filing and late payment charges have been extended this does not exclude interest. Late payments will accrue a debt of 2.75% interest.

A further 5% charge will be given if a payment plan has not been set up or if tax has not been paid by midnight 1 April 2022. Extra payment penalties are charged at the six and twelve-month period. The dates for this are August 2022 and February 2023 respectively.

Any tax return filed online in February will still be counted as late. However, it will be treated as having a valid reasonable excuse for the lateness. Thus, avoiding charges.

Where can I pay for my self-assessment tax bill?

Taxpayers can find an extensive list of payment methods on the GOV.UK website. Payment methods include:

Same/next day

Three working days

Five working days

Direct debit will take five working days to set up if it is the first time paying tax via direct debit.

Post office payments are no longer accepted. Furthermore, make sure payments reach HMRC on or before the last working day before a weekend or bank holiday. This does not include Faster Payments of debit or credit card payment.

The government has extended the deadline for self-assessment to 28 February. This means millions will potentially avoid late filing charges. However, this does not exclude interest accrued. This is to help counteract the damaging effects the pandemic has had on businesses and their scheduling. This is the second consecutive year the HMRC has made this exemption.

A Time to Pay service is available to spread the cost of payments for those that are struggling. Self Assessment taxpayers need to set this up or pay in full by 1 April to avoid late payments fees. Again payments made after the official tax payment date of 3 March will accrue interest.

Grants and Covid- 19 support schemes should be declared when appropriate. And, a number of ways to pay can be found on the GOV.UK website.