Low Incomes Tax Reform Group warns time is running out to avoid fines for late tax returns

The Low Incomes Tax Reform Group (LITRG) is reminding taxpayers that they have only a week to file their 2020/21 tax return online to avoid an automatic £100 late filing penalty. LITRG also highlights that any tax owed for 2020/21 should be paid, or a payment plan set up, on or before 1 April 2022 to avoid a late payment penalty.1
Last month HMRC said that if taxpayers were unable to file their 2020/21 tax return online by the deadline of 31 January 2022, they would not receive a £100 late filing penalty provided they file online by 28 February 2022.2 The announcement follows a similar relaxation which was announced last year for 2019/20 tax returns.3 

Despite calls from LITRG and HMRC, among others, for taxpayers to still file by 31 January if they can, nearly 2.3 million taxpayers missed the 31 January 2022 deadline – an increase of half a million on the previous year.4 These taxpayers must file by midnight next Monday night to take advantage of the relaxation from HMRC.

The due date for any outstanding tax, National Insurance or student loan repayments remained unchanged, meaning interest still accrues for 2020/21 tax paid after 31 January 2022. Today, the rate of late payment interest increased to three per cent from 2.75 per cent. But LITRG points out that taxpayers can avoid the usual 30-day late payment penalty if the amounts due are either paid or included in a time-to-pay arrangement on or before 1 April 2022.5 

Victoria Todd, Head of LITRG, said:  

“If you have not filed your tax return yet, even if there is no tax due or you are able to settle the amount you owe on or before 1 April 2022, we strongly suggest you get your tax return submitted now. Not only is interest accruing on any outstanding tax but leaving it until the last minute risks a late filing penalty if something unforeseen happens to prevent you from filing on or before 28 February 2022. Depending on the facts, you may not be successful at appealing any penalty if you had no good reason for missing the statutory filing date of 31 January 2022.

“Filing your tax return is also necessary if you wish to set up a payment plan with HMRC. The sooner the tax return is filed, the more time you will have to agree a payment plan without incurring a penalty if you anticipate that you cannot pay your tax liability in full by 1 April 2022.”