HMRC to waive fines for people who file late tax returns due to coronavirus – but you'll still be fined for late payment
Anyone who needs to file an annual self-assessment tax return online could avoid paying a penalty fee if they miss this month's deadline due to coronavirus-related reasons, HM Revenue & Customs (HMRC) has said – though penalties for paying tax late will still apply.
Update 25 January 2021: When this story was initially written it was about HMRC waiving late filing penalties for those affected by coronavirus. HMRC has now, however, said it will waive fines for anyone who files late so long as they do so by 11.59pm on 28 February 2021 - see our latest MSE news story for the full info. Those with coronavirus-related problems can still file after this date without incurring filing penalties, though it's best to still file on time if you can. Tax payments still need to be paid by 31 January 2021.
The deadline for completing a 2019/20 self-assessment tax return online is 11.59pm on Sunday 31 January – and those who file one later than that would usually have to pay a fine. But this year, HMRC has extended the deadline for everyone until 28 February 2021.
If you miss this extended deadline, HMRC says it will accept pandemic-related personal or business disruption as a "reasonable excuse" for being unable to file on time, and it'll cancel penalties as long as you file as soon as possible after that.
The taxman has, however, been vague on what exactly counts as a valid coronavirus-related reason. HMRC won't give us any specifics, and says only that it'll look at each situation on a case-by-case basis – so it's unclear, for example, if you can file late because you ran out of time due to homeschooling. If you can, it's still best to file on time to be safe. If you're struggling due to coronavirus but are unsure if you've a valid excuse, contact HMRC directly to check.
In reality, many who file late due to coronavirus may still have to pay a fine if they are late paying their tax, as the penalties for that remain unchanged – though they don't kick in until 30 days after the 31 January deadline. Interest on unpaid tax will also continue to accrue from 1 February. See our Coronavirus Self-Employed & Small Limited Company Help guide for more info on what you can do to boost your finances in light of the pandemic.
What's the usual penalty for filing a tax return late?
Under HMRC's usual rules, if you miss the 31 January deadline you'll be charged £100 – even if there's no tax to pay.
Further penalties of £10 a day are applied after three months, up to a maximum of £900. After six months, you'll also be charged 5% of the tax owed or £300 (whichever is greater), and this happens again after 12 months.
How do I ask HMRC to waive any fines for filing late?
If you file by 28 February 2021 you don't need to do anything to avoid the late filing penalty as this will automatically be waived.
File after this extended date due to coronavirus reasons and unfortunately there's currently no way of getting out of the fine in advance. So if you file after 28 February because you're affected by coronavirus you'll need to appeal against the penalty after you've been hit with it.
If you are fined the initial £100 penalty, HMRC will send you a letter telling you about the appeals process, and you will need to follow this – explaining why coronavirus meant you were unable to file on time – to overturn these fees. You can appeal via Gov.uk or by post. You'll need to set up a Government Gateway account if you do not have one to appeal online.
For other penalties, you need to appeal by post, sending a completed 'SA370 form' or letter explaining your appeal to HMRC's self-assessment department. You get a total of four months to appeal from the date of the penalty. See Gov.uk for full details, including the postal address to use.
Fees WON'T be waived if you pay your tax late due to coronavirus
HMRC says late payment penalties will operate as normal as things stand, so it won't waive fines as a matter of course if you've been unable to pay due to coronavirus. (As usual though, you can still appeal fines if you believe you have a "reasonable excuse" for not paying on time – see more on what this could include below.)
Of course, many may struggle to pay the correct amount of tax if they haven't also filed their return – so if you can file a return and pay your tax by 31 January, it's best to do so.
If you don't pay on time, as above, penalties for late payment don't kick in immediately after 31 January – you'll be charged 5% of the unpaid tax after 30 days, plus 5% after six months and again after 12 months. So if you miss the 31 January deadline, sort it as soon as you can and you may still be able to avoid a fine. Interest at 2.6% will also begin to accrue on unpaid taxes from 1 February.
If you were due to make an 'on account' (ie, advance) payment by 31 July 2020 – and not everyone has to – the Government gave you an extra six months to pay, but that runs out on 31 January unless you've agreed a separate repayment plan with HMRC. This payment is meant to cover roughly half of your 2019/20 bill and is calculated by using half of your actual bill for the 2018/19 tax year.
In addition, you need to pay any remaining tax owed from the 2019/20 tax year (known as a balancing payment) – again, unless you've agreed a repayment plan – as well as make your first payment on account for the 2020/21 tax year.
What if I'll struggle to pay my tax on time?
As above, it's worth bearing in mind that penalties for late payment aren't charged until 30 days after the 31 January deadline. But if you think you'll struggle to pay what you owe in time, you can use HMRC's 'Time to Pay' arrangement to set up a repayment plan. Those who owe tax of less than £30,000 (and more than £32) in January 2021 can use this to spread out that tax bill and repay it by direct debit over up to 12 months – even if that goes beyond the payment 31 January deadline.
To use this service, you need to have filed your 2019/20 tax return by the 31 January deadline - we've asked HMRC if this deadline has also been extended until 28 February and we'll update this story when we know more.
You also need to set up the repayment plan no later than 60 days after the due date of a debt. In addition, you need to have no outstanding tax returns, other tax debts or other payment plans set up. You can set up a Time to Pay plan online through your tax account, or you can call HMRC on 0300 200 3822 (Monday to Friday, 8am to 4pm).
However, bear in mind that those who use this system will pay simple (meaning it doesn't compound) interest of 2.6% a year from Monday 1 February until their bill has been paid in full.
A reasonable excuse for not filing or making tax payments on time is usually something unexpected or outside of your control, according to HMRC. For example:
- Your partner or another close relative died shortly before the tax return or payment deadline.
- You had an unexpected stay in hospital that prevented you from dealing with your tax affairs.
- You had a serious or life-threatening illness.
- Your computer or software failed just before or while you were preparing your online return.
- Issues with HMRC's online services.
- A fire, flood or theft prevented you from completing your tax return.
- Postal delays you could not have predicted.
- Delays related to a disability you have.