Last chance to pay tax for 2020-21 and avoid HMRC penalty

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Anyone who has yet to pay their 2020-21 tax bill has until April 1 to either settle the balance or set up a Time to Pay agreement. If you miss the deadline, you could receive a penalty equal to 5% of the tax you owe.

While the deadline for filing and paying taxes was still January 31, HMRC has pushed back the usual penalty schedule this year. While a £100 late filing fee is usually issued from February 1, it only came into effect on March 1.

Similarly, while taxpayers generally incur a fine of 5% for having paid their taxes late on March 3, this is postponed to April 2.

However, late payment interest is still in place and will be applied to any unpaid tax since February 1.

Here, which one? explains the rules for this year’s tax due dates and describes the different ways to pay your tax bill.

Ways to pay your tax bill

There are several ways to pay your tax bill, but the time it takes can vary.

HMRC must have received your payment by midnight on April 1, so make sure you don’t choose a payment method that will take too long.

Same day or next day:

  • bank online or by phone
  • chaps
  • online debit card
  • in branch in your bank or building society.

Three working days:

  • Bins
  • direct debit – if you have already set one up with HMRC
  • check by post (although this may take longer if Royal Mail services experience delays).

Five working days:

  • direct debit – if you have not already set one up with HMRC.

Some of these payment options can be made through the HMRC app.

HMRC no longer accepts tax payments by personal credit card and you can no longer pay your bill at the post office.

Payments made with a business debit card incur fees, which vary depending on your provider.

Payment deadline

If you can’t pay your tax bill, you may be able to set up a payment extension agreement. This is a payment plan that splits the tax you owe into smaller pieces, to be repaid over the next few months.

You can set up a self-service time agreement to pay online if:

  • owe less than £30,000 in tax
  • have filed your 2020-21 tax return
    • plan to pay off the debt in the next 12 months or less.

If you owe more tax than this or need more time to repay what you owe, call the Self-Assessment Payment Helpline on 0300 200 3822.

However, you must have taken steps to put the arrangement in place by April 1 or you will have to pay the 5% penalty tax.

What happens if you don’t pay by April 1?

Any tax payable for 2020-21 that has not been paid by April 2 – or for which a payment agreement has been put in place – will incur a 5% penalty.

So if you still owe £1,000 in tax on April 2, you will be charged £50, bringing your tax bill to £1,050.

The 5% fee will be based on the amount of tax due on March 3.

If you wait any longer on your tax bill, more penalties will be forthcoming. Any unpaid tax will incur additional penalties of 5% at the end of August 2022 and February 2023.

Interest charges

Interest has been applied to all unpaid tax balances since February 1 – it is charged in addition to additional late fees.

The interest rate charged on late payments has increased several times, in accordance with the Bank of England base rate. Interest was charged at 2.75% between February 1 and February 20; it rose to 3% on February 21.

The interest rate is expected to rise to 3.25% from April 5.

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What if you haven’t filed your tax return yet?

Despite the delayed late filing penalty, around 900,000 taxpayers could still have to pay the £100 fee. Of the 12.2 million tax returns expected, only 11.3 million had been filed by February 28, according to HMRC.

If you haven’t filed your tax return yet, do so as soon as possible – there are other late filing penalties that can be charged, which get more expensive the longer you wait.

From March 1, a daily penalty of £10 is applied. The daily charge will last for up to 90 days – which, coupled with the initial £100 fine – will mean you’ll owe another £1,000 on top of your tax bill.

Once your tax return is six months overdue, you will be charged either £300 or 5% of the tax you owe – whichever is greater.

If your tax return is 12 months late, you will be charged an additional £300 or a 5% penalty.

Try which one? tax calculator

If you haven’t yet submitted your 2020-21 tax return, you can still do so using the Who? tax calculator.

The online tool is jargon-free and easy to use; just enter your details and it will total what you owe. Moreover, it also suggests allowances and expenses that you may have overlooked.

When you’re ready, you can also use it to submit your return to HMRC.

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