If you’re self-employed or a high earner, it’s highly likely that you won’t be new to the annual self-assessment process via HMRC.
Even if you have an accountant who looks after your books, you should have 31st January, each year, highlighted in your diary as the deadline to file and pay your tax return. As complex as self-assessments may seem, they are part and parcel of running a business/earning beyond the threshold.
Usually, by surpassing this date, a £100 fine will be sent. Yet, do not worry, as this year, changes have been made. Down to greater pressures, experienced through Covid-19, news that HMRC waive the penalty for late filing of self-assessment tax returns has come to light, providing greater flexibility.
Naturally, this news will offer relief, especially if you’re yet to tackle your self-assessment. Yet, if you do have tax to pay, standing beyond the normal deadline, interest will now be added to your tax owed of 2.6%, which we urge you to pay as soon as possible.
Understandably, this last financial year has been very tough on business, down to the unprecedented times of the pandemic.
Through this, if you are struggling in relation to coronavirus related problems, even greater delays may be arrangeable. However, to secure this, contacting HMRC regarding your personal self-assessment will be recommended.
As tax returns, self-assessment processes and regulations are changing by the day, here’s some guidance on who should be filing a self-assessment, along with changes brought on by the waived penalty.
If you require support with your accounts, no matter how big or small of a business you may be, we at The Financial Management Centre are here to support you.
What is a self-assessment tax return?
By living and working in the UK, income is taxable. Commonly, through an employer, tax deductions will be made prior to being paid.
Yet, as the income of those who are self-employed and higher earners are more complex, all down to expenses, profits and varying forms of earning, a self-assessment tax return will need to be completed.
Many business owners in fact transfer their tax activity over to an accountant for ease and organisation, as business expenses are highly in-depth. Yet, being accountable over submitting and the filing of self-assessment tax returns and payments still stands, which is an annual requirement, usually falling to a deadline of 31st January.
If you’re reading this and panicking as we’re now into February, please see below regarding the news that HMRC waive the penalty for late filing of self-assessment tax returns.
A self-assessment can be completed both online and through the post. Yet, if you’re yet to complete your tax return for the financial year of 2019/20, you’ll be too late for postal submissions, meaning that an online self-assessment should be made as soon as possible.
Who needs to file a self-assessment tax return?
If you’re new to HMRC self-assessment tax returns yet have recently registered as self-employed or earned through multiple means, it’s important to know where you stand for future returns.
You will need to file a self-assessment if:
- You’ve earned more than £1,000 through self-employment
- You’ve earned more than £2,500 through non-taxable income, such as rent, commission or bonuses
- Your taxable earnings fall beyond £100,000
- You’ve earned in both the UK and abroad
- You’ve been paid through a trust
- Your income surpassed £50,000 and child benefits have been claimed within your household
- Your state pension surpasses your tax personal allowance
- You’ve completed a self-assessment tax return in the previous year
- You’ve been told to submit a self-assessment by HMRC down to underpaid tax from previous years
Completing a self-assessment and filing your tax return is a must if you fall within the above criteria. However, you will only need to pay tax on earnings above your personal allowance of £12,500.
To offer ease you can file your self-assessment tax return and pay your tax in advance of the yearly deadline. By missing the deadline, a penalty of £100 is commonly sent by failing to file your tax return, and a 5% fine will also be attached to unpaid tax after 30 days of the deadline.
HMRC waive penalty for late filing of self-assessment tax returns – Here’s why
As we’ve shared above, commonly both your self-assessment tax return and the payment of owed tax should be completed by the deadline of 31st January. In normal times, if you’re yet to do both, a fine will be on its way to you.
Yet, down to Covid-19 related problems, news of HMRC waive penalty for late filing of self-assessment tax returns has been released, meaning that you still have a chance to avoid a fine.
By submitting your self-assessment tax return before 11.59pm on 28th February, your penalty will be waived. However, if you did owe tax, from previous financial years or from delaying July 2020’s payment, and have yet to pay this, interest will be added to your unpaid sum.
If you’re unable to make payments, we recommend that you contact HMRC to arrange a repayment plan, yet interest will still, unfortunately, be charged.
If you’re worried about the potential of penalties for late filing of self-assessment tax returns, here’s a handy tool to provide an estimation of how much you’ll owe.
Support here at The Financial Management Centre
Here at TFMC, we appreciate that this may be a lot to digest if you’re new to HMRC’s self-assessment process. Yet, if you’re self-employed or a high earner, understanding and completing self-assessments are a must, which should become a routine activity for you, annually.
Down to this, if you require support with organising your books, sorting through business expenses, and gauging your tax liability, we can assist, ensuring that you’re within annual deadlines and regulations.
So far, HMRC have waived the penalty for January’s tax returns. Keep your eyes peeled for news regarding any changes to February’s deadline, along with future payments within July 2021.