Not many clients realise that HMRC slaps on a significant amount of interest (at 2.6%) on late paid tax, plus additional late payment penalties at 5% of the amount still unpaid after 30 days.
If the taxpayer has not fully paid his balancing payment for 2019/20 by 31 January 2021, the following penalties would normally be added on these dates:
- 3 March 2021– 5% of the unpaid tax
- 31 July 2021– 5% of the unpaid tax
- 31 January 2021– 5% of the unpaid tax
These late payment penalties do not apply to the payments on account due for 2020/21.
Due to the difficulties many businesses are currently facing, HMRC has decided to waive the first late payment penalty on 3 March 2021 for businesses that set up a monthly payment plan with HMRC by midnight on 1 April 2021. The late paid interest will continue to be charged at 2.6%.
Where the tax debt does not exceed £30,000 the tax payment plan can be set up online – but the taxpayer must do this themselves – we can’t agree to make direct debit payments from the client’s bank account.
However, you may want to wait until the Budget announcements on 3 March to be sure about the amount of business rates due in 2021/22. There is a rumour that some businesses will qualify for a further deferral of business rates, and that the furlough scheme will be extended into the summer. We will know more this time next week.Written by the Tax Advice Network