With 2021 now well and truly behind us, the self-employed and accountants across the country will be turning their attention to the looming Self Assessment Income Tax deadline on 31 January.
Those struggling to file their tax return by the end of the month may be pleased to learn that HMRC has said that late filing and payment fines will be waived for up to one month.
Failure to meet the 31 January Self Assessment deadline usually results in an instant £100 fine but for the second year in a row, you’ll not receive a late filing penalty, as long as you submit your online return by 28 February 2022. You’ll also not receive a late payment penalty if you pay your tax in full or enter into a payment plan by 1 April 2022.
Why has HMRC waived Self Assessment penalties?
We may not be living under the same tight restrictions as the lockdown measures we saw in early 2021, but the knock on effects of Covid-19, coupled with the spread of the Omicron variant, have all taken their toll. To help ease the pressure, HMRC is giving millions of people more breathing space to manage their tax affairs.
Angela MacDonald, HMRC’s Deputy Chief Executive said: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19.
“Our decision to waive penalties for one month for self-assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”
A similar month-long waiver was announced last year, initially only for people and businesses directly affected by Covid-19, but HMRC later stated that fines would be waived for anyone who filed late.
Who will benefit?
Self-employed individuals will breathe a sigh of relief, as will accountants and tax advisors who usually feel the pressure throughout January.
HMRC will also benefit from the move as, of the 12.2 million taxpayers who are required to submit a tax return by 31 January, only 6.5 million have already done so. The extension will ease concerns over the number of returns that haven’t yet been filed and mitigate appeals raised due to the pandemic.
This all sounds great, but there’s an interesting catch – interest on late payments still applies!
An extra month to file your tax return may sound appealing, but you must be mindful of the interest that will incur on unpaid tax from 1 February.
Late payments will incur daily interest of 2.75%, so HMRC are still encouraging people to file and pay on time if they can.
Making Tax Digital for Income Tax Self Assessment (MTD ITSA)
MTD ITSA is the next stage of the MTD rollout, the government’s initiative to digitise record keeping and increase reporting for businesses in the UK.
MTD ITSA was due to take effect from April 2023, and would affect all self-employed people and landlords with an annual turnover exceeding £10,000. However, in September 2021, the government announced a delay to this next phase of the initiative. Under current plans, MTD ITSA will apply to those with self-employment income or rental property income from April 2024, and those in partnerships from April 2025.
Although MTD ITSA has been pushed back, now is not the time to take your foot off the accelerator. With the amount of businesses that will be affected by MTD ITSA, it’s important that accountants act now to ensure that their clients comply with the changes.
If you don’t already have a go-to option for accounting software, it’s also worth thinking about the industries your clients work in, the functionality they might need from a digital product, and how intuitive it’s likely to be for those clients that still prefer the spreadsheet approach to accounting!
Not only is Clear Books MTD-compatible, it’s also highly intuitive, easy to use (even for those with zero accounting experience), and has a wide range of functionality, including everything from automated invoicing and payment reminders to the easy management of CIS requirements.
Always here to help
As ever, Clear Books is here to support you every step of the way, providing you with the latest updates, MTD guides, and anything else you need to know to make the transition easier.
Clear Books: Online accounting software for small businesses
Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances. All users benefit from the outstanding free telephone and email support. Clear Books was launched in London in 2008 and offers a free 30 day trial with free ongoing support and bank feeds. We’re rated as ‘Excellent’ on Trustpilot.
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