I've missed the tax deadline boat - so what's next for me?
QUESTION: I have just realised that I had completely forgot about the self assessment filing deadline and my tax return should have been submitted yesterday and tax paid. What is the situation in relation to fines and what tax do I have to pay now?
ANSWER: You are correct in that the UK self assessment filing deadline is January 31 following the end of the income tax year. The tax returns for the tax year ended April 5 2020 were due to be filed by yesterday, with payment of any tax due/
But following a surprise announcement last week, HMRC chief executive Jim Harra extended the filing deadline until February 28 (though he did not extend the payment deadline, so if you owe tax you will start incurring interest from today).
The tax that is normally payable on January 31 each year is any balance of tax due for the tax return in question, together with a first payment on account for the tax year which has not yet ended (2020/2021 at the minute).
In addition, January 31 following the end of the tax year is the day in which capital gains tax due on capital gains realised during the previous tax year needs to be paid.
However, there is an important exception from this which is capital gains incurred by UK residents on the disposal of residential property (with the exception of your own home or inter-spousal transfers). Contracts exchanged for the sale of UK residential property on or after April 6 must be paid within 30 days of the transaction.
Following the outbreak of Covid-19, HMRC advised tax payers that they could defer making their July 31 second payment on account for the 2019/20 tax year. If you availed of this facility, you must remember that you have to make this payment now along with any balancing payment due for the 2019/20 tax year as well as the first payment on account for the 2020/21 tax year. Interest will be charged from February 1 on any outstanding tax liabilities.
But HMRC recognise that many tax payers in these unprecedented times may not be able to afford to pay all of their tax bill in one lump sum and therefore you can apply online to spread the tax liability over a period of up to 12 months.
However, you must file the 2019/20 tax return before they will entertain allowing you a time to pay arrangement. And therefore it is advisable that you file your tax return as soon as practicably possible.
Thankfully, there will be no late filing penalties charged for the filing of your late online tax return if it is filed online before February 28.
The Revenue has also confirmed that an online payment plan can be set up to spread the payment of your self assessment bills of up to £30,000 over 12 months. However, if you bill exceeds £30,000 or if you need more than 12 months to pay the bill, a bespoke time to pay arrangement must be negotiated with HMRC directly. The initial request for this must be made personally even if you have a tax agent.
You should also remember that many tax payers will have lower tax bills in the 2020/21 tax year due to the effect of Covid-19 on their businesses/earnings. For this reason it is important to consider the amount that you need to pay on account as part of your January 31 2021 self assessment.
If you think that you tax bill is going to be significantly less then you should reduce your payments on account accordingly which can be done on the Government Gateway facility or if you use an accountant to file your self assessment return, you should discuss this matter with your accountant urgently.
:: Paddy Harty (email@example.com) is a senior tax director at PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.