The number of online searches using the phrase ‘can’t pay tax’ has risen ninefold in response to renewed pledges to increase National Insurance by 1.25% in April, despite a crushing rise in cost of life.
Online tax calculator Income Tax UK found the ‘unprecedented rise’ corresponded to the planned health and social care tax – which is expected to create £12billion in ring-fenced revenue – which was reconfirmed this week .
The news comes days before the January 31 self-assessment deadline. The dates for the payment of taxes due for the 2020/21 financial year have already been postponed in the face of economic turbulence. At the time of writing, around four million self-assessments were still outstanding.
As pressure mounts to delay a National Insurance increase in a bid to ease pressure for the coming fiscal year, a number of economics experts have suggested Chancellor Rishi Sunak has the “room tax” to delay the April tax hike during a cost of living crisis that has resulted in a current rate of inflation not seen in three decades. Forecasts released this week suggest energy bills could rise another 50% in April as the bill cap is raised in response to rising wholesale gas prices.
“The latest public finance data shows that between April and December the UK government borrowed almost £13bn less than the [Office for Budget Responsibility] planned,” says Julian Jessop, an economics researcher at the Institute of Economic Affairs (IEA) think tank. “It provides the ‘fiscal headroom’ to give up hiking.
“The economy has recovered faster than expected, creating a ‘growth dividend’ for the Treasury. Rising inflation increases the amount the government must spend on interest payments on inflation-indexed debt. However, the concomitant increase in nominal incomes also increases tax revenues and reduces the debt burden as a percentage of GDP.
“The government may still have to find more money later to fund a long-term increase in health and social care spending. But the rise in NICs in 2022/23 was intended to help cover the one-off costs of repairing the NHS backlog caused by the pandemic.
“Therefore, it is entirely credible to use the growth dividend to pay for these costs, rather than increasing the tax burden even further by increasing NICs now.”
Meanwhile, HMRC is urging the four million customers – out of the 12.2 million who are due to submit a return for the last tax year – to file theirs, as well as pay any outstanding liabilities or put in place a recovery plan. payment before the January 31 deadline.
Although HMRC has confirmed it will waive penalties for late filing of tax returns and late payments at the start of the month, interest will still be charged on all outstanding balances from February 1.
The changes mean that anyone who cannot file their return by the January 31 deadline will not receive a late-filing penalty if they file before February 28, and anyone who cannot pay their tax debts by January deadline will not receive a late payment penalty if they pay their tax in full, or set up a payment delay agreement, before April 1.
As the 2020/21 tax return covers income and payments during the pandemic, taxpayers will need to report whether they received any grants or payments from Covid-19 support schemes until April 5, 2021 on their car -assessment, as these are taxable.
They include Self-Employment Income Support Scheme payments, the Coronavirus Job Retention Scheme and other Covid-19 grants and aid such as self-isolation payments, local authority grants and those of the Eat Out to Help Out program.
The £500 one-off payment for working households receiving tax credits should not be declared in the self-assessment. If customers owe more than £30,000 or need more time to pay, they should call the Self-Assessment Payment Helpline on 0300 200 3822.
A comprehensive list of payment methods taxpayers can use to pay your self-assessment tax bill is available on GOV.UK.
But deadlines and payments are not the only challenges faced by stressed taxpayers, strapped for time and money, as HMRC has also issued new warnings about fraudsters posing as tax staff.
Taxpayers should be particularly vigilant if they are contacted out of the blue by someone asking for money or personal information, whether they claim to be from HMRC or not.
Warning signs include the use of pressure tactics to pressure victims into disclosing personal information and/or making payments over the phone. Anyone receiving an unexpected call demanding payment should decline to provide details, hang up and contact HMRC independently – ideally from another phone.
In the meantime, taxpayers should still enter the full online address www.gov.uk/hmrc to get the correct link to file their tax return online securely and free of charge. If in doubt, HMRC advises not to respond directly to anything suspicious, but to contact the service immediately and search GOV.UK for “HMRC scams”.