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HMRC Self Assessment tax deadline falls this week – take action now to avoid a penalty

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HMRC altered Self Assessment tax return rules throughout 2020 as coronavirus continued to impact the economy. However, a deadline occurs this week and should affected workers not take action, they may face hefty penalty charges.

A five percent late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on April 1 2021. Further late payment penalties are charged at six and 12 months (August 2021 and February 2022 respectively), on tax outstanding where a payment plan has not been set up

According to the Government, a person must send a tax return if, in the last teax year, they were self-employed as a “sole trader” and earned more than £1,000 or were a partner in a business partnership.

People will not usually need to send a return if their only income is from their wages or pension, but they may need to send one if they have any other untaxed income, such as:

  • Money from renting out a property
  • Tips and commission
  • Income from savings, investments and dividends
  • Foreign income

Recently, the Government released details on how they plan to modernize the tax system on “tax day”.

The changes were broadly welcomed but Victoria Todd, the Head of the Low Incomes Tax Reform Group (LITRG), cautioned on how the changes may impact underprepared taxpayers should the Government misshandle the rollout: “We are generally supportive of the planned modernisation of the tax system, but HMRC must ensure that it does not leave any taxpayer behind, including those who struggle to operate digitally.

“The tax administration framework is long overdue a review and update. HMRC’s plans are bold and ambitious. Time must be taken to get things right. It is therefore welcome that HMRC do not appear to be rushing through major changes but have today launched open calls for evidence.

“In December 2020, LITRG published a paper3 setting out seven principles for the tax system, under which we made 47 practical recommendations. We will be responding to the calls for evidence with these principles firmly in mind to ensure that the needs of low-income, unrepresented taxpayers are fully met.

“Two of the principles are particularly relevant today. The first is that the tax system must be accessible and responsive. Not everyone can deal with their affairs digitally and some will require more hand-holding than others in adapting to digital changes. HMRC must ensure that traditional channels remain accessible in practice and not just in theory.

“The second is that the tax system must be joined up. Major changes to the tax system cannot, and should not, be considered in isolation. HMRC must work with other government departments and ensure they fully understand potential interactions with other systems, such as welfare benefits. For example, if HMRC were to move to a system in which tax payments were made more regularly than they are under Self Assessment, this could have impacts for universal credit claimants.

“We therefore welcome HMRC’s willingness to engage with stakeholders to help develop their plans and indeed HMRC’s specific mention of vulnerable and low-income people in today’s publications is reassuring.”

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