HMRC delays imposing late payment penalties

HMRC has announced that it is delaying the 5% late payment penalties for self-assessment taxpayers.

HMRC normally charges late payment interest from 1 February on any self-assessment liabilities not paid by 31 January, as well as a 5% late payment penalty on tax still unpaid on 3 March.  

This year, because of the COVID-19 pandemic, HMRC is delaying the 5% penalties so they will only be charged on tax still unpaid at 1 April 2021 (a delay of about four weeks).

This announcement is a welcome further step by HMRC to adapt their usual deadlines for the pandemic, following the delay to the imposition of self-assessment late filing penalties until 28 February 2021. Both of these are exceptional moves from HMRC and are very welcome ones as we are living in exceptionally difficult circumstances. The late payment change will specifically support people struggling with their financial affairs, and offers additional and much-needed respite.

While taxpayers who owe HMRC less than £30,000 can swiftly set up a Time to Pay arrangement with HMRC using the online facility, those who owe more will need to organise a bespoke payment plan by phoning HMRC and may need to demonstrate their financial hardship. This can be time consuming and with the plethora of other challenges many currently face, allowing more time for this to take place is a fair and pragmatic move from HMRC.

Read our Time to Pay guide for more information.

HMRC is encouraging taxpayers to set up time to pay arrangements before 1 April 2021, if they cannot pay in full before then. If a time to pay arrangement is in place, HMRC will not charge the 5% penalty on the amount still owed on 1 April. However, it should be noted that HMRC’s announcement just relates to this one penalty – there is no indication that the second 5% late payment penalty - usually charged on tax unpaid 6 months after the due date - will be delayed.

If you have any queries about this announcement, or if you or your client want further help regarding Time to Pay Arrangements please get in touch with a member of our team.