Tax return deadline extended – but don't forget to file

HMRC is being slightly more lenient about tax returns this year, but falling behind will still incur hefty fines.

With just over a week left until the end of January, many of us are thinking about our tax returns. But this year you have a bit more time to sort out your taxes because HMRC has extended the deadline.

In normal years you have until 31 January to file your tax return, but this year the taxman has pushed the date back to 28 February. However, that doesn’t mean you should wait. Not filing until February could still cost you money.

The new deadline for submitting your tax return

In recent weeks, HMRC has come under increasing pressure to extend the deadline for submitting 2020-2021 tax returns, because the Covid-19 pandemic has left many people struggling to complete their accounts. Accountancy firms have reported “widespread staff shortages caused by the spread of Omicron”, says Harry Brennan in The Daily Telegraph. “They said this was making it impossible for professionals to meet the cut off date, meaning taxpayers faced being unfairly punished for their accountants being off sick.”

Missing the 31 January deadline usually results in an instant £100 fine, plus additional penalties that can leave you owing thousands more. However, HMRC has announced that you won’t face a late filing penalty this year if you submit your tax return online by 28 February.

The end of January also usually marks the deadline for paying any tax due, but this is being extended as well. You won’t face a late-payment penalty provided you pay your bill or set up a “time to pay” arrangement by 1 April. The latter is a new system HMRC brought in to recognise that people could struggle to pay their bills if the pandemic lockdowns affected their income. Under the “time to pay” rules anyone owing up to £30,000 can arrange to pay what they owe in instalments.

You own't be fined, but you’ll still pay interest

However, HMRC isn’t giving you a completely free ride. You won’t pay any penalties if you miss the 31 January deadline for paying your tax bill, but HMRC will start charging interest on anything you owe at a rate of 2.75% from 1 February. So if you can get your tax return filed and your bill paid by the usual end of January deadline, you should make sure you do so.

If you miss the new 28 February deadline, you will immediately be fined £100. After that, £10 a day is added up to a maximum of 90 days. Anyone who is more than six months late in filing will pay the higher of either £300 or 5% of the tax due. If you are a year late filing your tax return HMRC could fine you 100% of the bill.

Still, while you should try to file this month, the benefit of having until 28 February to file without fines is that you don’t need to panic if you’re struggling. Taking the time to get things right could mean you avoid a hefty unexpected bill. HMRC will fine you up to 30% of your bill for careless mistakes, rising to 100% if it thinks the error is deliberate.

Don’t forget Covid-19 loans

It’s particularly important to make sure you understand the rules surrounding any coronavirus-related government handouts you may have received. This is the first year that taxpayers will need to include any Covid-19 support, such as money from the self-employment income support scheme or business support grants. Any payments received through these schemes are subject to income tax, so you need to declare them on your tax return.

“The fact that the Covid-19 support payments are taxable has come as a shock to many and has resulted in unexpected tax bills,” says Michelle Denny-West, a tax partner at the accountancy firm Moore Kingston Smith in The Times.

There are new sections on the tax return where you will need to give details of any Covid-19 loans, grants or payments you received. The money received through these grants will be added to your overall income and taxed accordingly. 

Recommended

Could a stronger euro bring relief to global markets?
Currencies

Could a stronger euro bring relief to global markets?

The European Central Bank is set to end its negative interest rate policy. That should bring some relief to markets, says John Stepek. Here’s why.
24 May 2022
2021 Akitu: New Zealand’s finest “white” pinot noir
Wine

2021 Akitu: New Zealand’s finest “white” pinot noir

Act without delay to secure this enchanting Kiwi white – there is nothing like it on earth
24 May 2022
Six high-yielding funds for income investors to buy now
Share tips

Six high-yielding funds for income investors to buy now

Rising interest rates are starting to make many popular income funds look less than attractive. Here, David Stevenson picks six that should weather th…
24 May 2022
How to ask for a pay rise
Personal finance

How to ask for a pay rise

A higher salary is the best way to combat the cost of living crisis. Ask for a pay rise now, says Ruth Jackson-Kirby.
24 May 2022

Most Popular

Imperial Brands has an 8.3% yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% yield – but what’s the catch?

Tobacco company Imperial Brands boasts an impressive dividend yield, and the shares look cheap. But investors should beware, says Rupert Hargreaves. H…
20 May 2022
Barry Norris: we’re already in the 1970s. Here’s how to invest
Investment strategy

Barry Norris: we’re already in the 1970s. Here’s how to invest

Merryn talks to Barry Norris of Argonaut capital about the parallels between now and the 1970s; the transition to “green” energy; and the one sector w…
19 May 2022
Share tips of the week – 20 May
Share tips

Share tips of the week – 20 May

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 May 2022