Why you shouldn’t relax about tax (even with the deadline extension)

The taxman is taking mercy on us again this year, relaxing the return deadline and allowing those who cannot afford bills to spread payments.

But as millions of workers struggle to file their tax return before the end of the month, HM Revenue & Customs (HMRC) is giving itself a chance to recover from a pandemic staffing crisis.

The taxman could also have netted as much as £12 million in interest charges by allowing those who could not pay their bills upfront to stagger payments last year.

Penalties: The taxman will levy a fine of up to 30 per cent of your bill for careless errors, and as much as 100 per cent for deliberately not declaring something

And, as close to half of us are still yet to file, experts today warn that HMRC will not be so lenient if errors and late payments are made — despite millions of pounds in taxes now due on Covid support payments.

D-Day for Covid handouts

The looming January 31 self-assessment online deadline means millions of workers will have to face up to debt accrued during the difficult 2020/21 pandemic tax year.

Among those facing big bills include those who received government support.

People who cashed in on the staycation boom by letting out property will have to pay tax on their takings. So, too, will those who started their own businesses.

Strict: Experts warn that HMRC will not be so lenient if errors and late payments are made – despite millions of pounds in taxes now due on Covid support payments

HMRC last week announced it will relax the deadline so that anyone who fails to file their return by the end of the month will not face a £100 late penalty if they file before the end of February.

The taxman made the move for the second year running after the new Omicron variant wreaked havoc on billpayers, accountancy firms and at HMRC.

More than 12 million taxpayers have to fill in a self-assessment return this year and pay off the balance owed.

This includes the self-employed, landlords, small-business owners, and parents who earn more than £50,000 and have to pay back child benefit. So far, around 6.9 million have filed.

Why is doesn’t pay to delay

Accountants are warning that taxpayers should do all they can to pay up because any bills not settled by the end of the month will start accruing interest.

HMRC is again allowing tax debts of up to £30,000 to be paid over instalments via ‘time to pay’.

But if taxpayers fail to arrange this before the end of March, they face a 5 per cent penalty charge on the amount owed.

Fees: The taxman could also have netted as much as £12 million in interest charges by allowing those who could not pay their bills upfront to stagger payments last yearHMRC says 123,000 taxpayers used ‘time to pay’ online to spread the cost of their 2019/20 bill.With payments delayed worth a total of £460 million, and interest charged at 2.6 per cent, the taxman could collect an extra £12 million if all debt was repaid over 12 months.So far this year, more than 30,000 taxpayers have chosen to spread payments for debts worth around £75 million.This is 5,000 more people and £5 million more payments than this time last year. And this year, interest on the debt will be added at 2.75 per cent — an extra £825 on a £30,000 bill.The interest charged is an extra 0.15 per cent higher than last year after the Bank of England hiked the base rate.Penalty minefieldAfter the online tax return deadline was relaxed last year, around 700,000 people filed late — but before the end of February to avoid a penalty.Some 890,000 taxpayers were hit with a penalty for missing the delayed deadline.Anyone who doesn’t meet the new February 28 deadline this year will be automatically fined £100. Then £10 is added every day for a maximum of 90 days.Backlog: As millions of workers struggle to file their tax return before the end of the month, HM Revenue & Customs is giving itself a chance to recover from a pandemic staffing crisisIf the form is six months late, the taxman charges a penalty of the higher of either £300 or 5 per cent of the tax due. If it is a year late, HMRC could even charge you a penalty worth 100 per cent of the bill.Experts also warn that the more time you give yourself to file now, there is less risk of making an error.The taxman will levy a fine […]

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