HMRC defers 5% late payment penalties

19 February, 2021

On 19 February, HMRC made a welcome announcement that taxpayers who have not yet settled their 2019/20 tax bill will not be charged a 5% late payment penalty provided that they they pay their tax or set up a Time to Pay agreement by 23:59 on 1 April 2021.

Last month, HMRC confirmed that the usual £100 late filing penalty for 2019/20 returns filed after the deadline of 31 January 2021 would be waived - provided that any outstanding returns were filed electronically on or before 28 February 2021. Any return filed after this date will attract the usual £100 filing penalty.

However, taxpayers were still asked to pay their tax by 31 January 2021 with interest on unpaid bills starting to accrue from 1 February 2021. In addition to interest, taxpayers can also be charged late payment penalties. Under the usual rules, a 5% surcharge is added to any amounts unpaid by 3 March 2021 – which did not allow those filing at the end of February much time to get their tax bill settled. The ATT therefore very much welcomes the announcement that, for 2019/20, HMRC are delaying the imposition of this penalty and are giving taxpayers until midnight on 1 April 2021 to either pay their 2019/20 bill or agree a Time to Pay arrangement.

The deadlines that self-assessment taxpayers therefore need to keep in mind are:

  • 28 February 2021 –2019/20 tax returns must be filed on or before this date to avoid late filing penalties
  • 1 April 2021 – taxpayers must settle any outstanding 2019/20 tax or agree a payment plan on or before this date to avoid a 5% surcharge on any unpaid tax.

Time to pay arrangements

Agreeing a Time to Pay plan with HMRC allows taxpayers to spread their 31 January 2021 bill over the next 12 months. However, in order to apply for a Time to Pay agreement a taxpayer must get their self-assessment tax return in to HMRC first. It is not possible to apply to HMRC for a Time to Pay arrangement until the relevant return has been filed and it is known how much tax is due.

Those with less than £30,000 of tax still outstanding under self-assessment (including any amounts deferred from 31 July 2020) should be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Anyone who cannot use the online service, can use HMRC’s Time to Pay Self-Assessment Helpline on 0300 200 3822 to agree a payment plan instead. This document provides a helpful guide to the kind of information HMRC will ask for on the call.

Further information 

HMRC’s Press release issued on 19 February is available here and further guidance from HMRC if you have difficulties paying here.