Self Assessment deadline: penalty date postponed

It’s the most tedious time of the year. That’s right folks, Christmas is over and the moment has now come to focus on the next big event in small business calendars – the online Self Assessment tax return deadline.

The tax return is for the 2020/2021 tax year, which ended on 5 April 2021. The annual deadline is 31 January 2022.

But, in light of disruption caused by the Covid-19 pandemic, HM Revenue and Customs has announced a penalty waiver for the second year running. If you’re one of the millions of UK taxpayers who still need to send your return, you have been given until 28 February 2022 to avoid a £100 fine for filing late.

Below, we’ll go through the tax return process, what the penalty is for missing the deadline, and how to get help if you’re struggling to make the payment on time.

This article will cover:

When is the deadline and what if I miss it?
How do I send a Self Assessment tax return?
What help is available?

When is the deadline and what if I miss it?

Previously, the rule was that online tax returns have to be completed by midnight on 31 January, 2022 and any tax due must be paid by the same deadline.

In light of pressure created by the coronavirus pandemic and its various business interruptions, HM Revenue and Customs (HMRC) has announced an extension to this date.

Small businesses now have an extra month to file their tax returns – extending the deadline to February 28 for the second year running. Interest will still be charged on any outstanding payments on February 1.

However, HMRC has also stressed that anyone who can file their tax return by January 31 2022 should still do this. The HMRC service is often under strain during this busy period, with people unable to get through to the tax office by phone and post. You should aim to start the process as early as possible and avoid potential delays.

The deadline for filing paper returns for the 2020/21 tax year was 31 October 2021 – so, to avoid a fine, you must now file your return online.

The deadline is particularly important for the self-employed, who make up the majority of those completing the tax return.

As well as reporting your income and other earnings, you’ll also need to factor in any coronavirus financial support you have received in recent months including SEISS (Self-employment Income Support Scheme) grants.

Lee Murphy is Managing Director at The Accountancy Partnership. Murphy told us that as a result of the above, this year’s returns are likely to be particularly complex: “Many businesses have used government support during the pandemic, and this will take extra accounting for.

“It’s advisable to give accountants and financial professionals as much time to sort through your returns as possible, especially as demand for their services surges in the weeks before the deadline.”

What is the penalty?

Missing the tax return deadline can quickly become very costly. The current penalty for filing a late tax return is £100, if your tax return is up to 3 months late (starting from February 28 2022). Any longer and your bill will increase by £10 per day, up to a maximum of £900.

You’ll also be charged interest on any late payments.

HMRC has previously reported that many taxpayers leave it until the last minute to pay what’s due, raising the likelihood of being hit with late penalties.

In fact, according to HMRC data, over 2,700 customers filed their Self Assessment tax return on Christmas Day in 2020 – and more were expected to do the same in 2021.

Accounting software is a great way to stay on top of your finances and make sure you meet deadlines, such as the Self Assessment tax return. Read our guide to the best accounting tools for small businesses to find out more.

How do I send a Self Assessment tax return?

Self Assessment tax returns can be filed online through the government website.

It can look daunting if you’ve not done it before, but it’s relatively simple once you break down the process into smaller steps.

1. Check if you’re registered

If you’re newly self-employed, or didn’t send a tax return last year, you first need to register. Technically, the deadline for registration was 5 October 2021, but you can still choose to register now. What’s more important is that you file the tax return itself before the deadline.

You can register for Self Assessment on the Gov.uk website, after which you will be sent a unique UTR (unique tax-payer reference) number. This is a ten-digit number that’s directly issued by HMRC and is used to identify you within their online system.

It’s a good idea to get this done as soon as possible if you haven’t already, as your UTR number is usually sent out within 10 days (and 21 days if you’re abroad) of registering with HMRC.

If you think you do not need to submit a tax return, you can phone HMRC on 0300 200 3310 and ask for the tax return to be withdrawn.

2. Check that you qualify

Most UK taxpayers have their taxes deducted automatically from their wages, pensions or savings, and won’t need to file a tax return. You’ll normally need to submit a tax return if you are:

a partner in a business partnership
self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)

However, there are other specific criteria, such as if you made money from renting out a property, which might qualify you to pay. It’s quite a long list – you can find it here.

3. Check you have all of the below details:

Ten-digit Unique Taxpayer Reference (UTR)
National Insurance number
Details of your untaxed income from the tax year, including income from self-employment, dividends and interest on shares
records of any expenses relating to self-employment
Any contributions to charity or pensions that might be eligible for tax relief

P60 or other records showing how much income you received that you’ve already paid tax on

4. Fill out the sections

There are two sections to a Self Assessment tax return.

The main section is the SA100, which deals with taxed and untaxed income in the form of dividends and interest, pension contributions, charitable donations and state benefits.

If you have extra income to declare from self-employment, property or capital gains, you’ll also need to fill in supplementary pages.

Want to know more about how to file a tax return? It’s a complicated process. Read our complete guide on how to do a tax return for a full breakdown as well as some handy insights and tips to make it even easier.

Once you have submitted your Self Assessment tax return, you’ll be told how much tax and, if you’re self-employed, National Insurance contributions you’ll need to pay.

What if you make a mistake?

Because you don’t need to fill in your Self Assessment tax return in one go, it’s a good idea to start early and work through the process slowly to avoid mistakes.

If you have made a mistake then luckily, before you submit, you’ll be given the chance to check your return and correct any mistakes you’ve made.

You can still make changes until the filing deadline the year after. This means, for the tax return you submit by 28 February 2022, you can make changes until 28 February 2023.

What help is available?

If you’ve left it late to file your return, and you’re worried you might not get everything sorted in time then don’t worry: there are other options available.

Speak to HMRC

You may be able to avoid late payment penalties by coming to an arrangement with HMRC to spread your payments over a period of time.

You’ll need a reasonable excuse for not paying your tax on time – such as a serious or life-threatening illness – that prevented you from meeting the tax obligation. HMRC may then suggest you pay what you owe in instalments (referred to as a Time to Pay arrangement).

You can phone HMRC on 0300 200 3310 to discuss a Time to Pay arrangement.

Use a third-party expert

You don’t have to fill in the tax return yourself. A good way to avoid making mistakes and make sure the process runs smoothly is to use a third-party app or consultant.

Our 2021 Startups 100 index featured the accounting software TaxScouts in our top 12 startups that are disrupting the industry thanks to their innovative ideas.

TaxScouts describes itself as the “fast, painless” way to do online taxes. The company charges a flat fee of £119 to match customers with a vetted accountant who completes and files the tax return on their behalf.

There’s nothing to learn or download – you can even complete the online process from your phone. This could be a good alternative if you’re worried you won’t have time to complete the return on your own.

Take aways

The self-assessment process is not a fun-filled activity. However, it can be made more bearable by keeping records and planning for tax time throughout the year.

This is where financial management options like accounting software or a professional accountant, prove particularly useful – and can reduce the actual filing process to a straightforward admin task. The penalty for completing a Self Assessment tax return late can quickly become expensive, so it’s a worthwhile investment to make.

The best time to plant a tree was twenty years ago – but the second-best time is today. Our best advice is to get ahead of the approaching deadline as soon as possible to avoid unnecessary stress down the road.