GoSimpleTax - Important self-assessment updates via HMRC
As the
pandemic continues to impact our way of life, it’s never been so important to manage
finances and plan ahead. Understanding the latest tax changes and how they will
affect you can be hard to get your head around, especially with everything
going on.
We
appreciate that it’s difficult to stay on top of tax law at a time of such
uncertainty. That’s why we’ve asked Mike Parkes from GoSimpleTax to break
down the biggest support package of 2020, and how it could impact you in 2021.
The introduction of the
Self-Employment Income Support Scheme (SEISS)
On 26th
March 2020, Rishi Sunak announced that the government would support self-employed
workers in the
form of a grant worth 80% of their profits for a period of three months. This
was capped at £2,500 and applications were closed on 13th July 2020.
To
qualify, you had to meet a number of
requirements.
Firstly, more than half of your income had to come from self-employment.
Secondly, to protect against fraud, you had to already be self-employed and have
submitted your tax return for 2018/19 before the 31st January 2020 deadline.
This enabled HMRC to calculate the grant payment due if you were eligible.
On 29th
May 2020, SEISS was extended by a further three months, allowing those previously
eligible to claim a second grant. This instalment was worth 70% of average
monthly trading profits, paid out in a single sum covering three months’ worth
of profits and capped at £6,570 in total.
The
third grant, announced on 24th September 2020, covered the three month period
from 1st November 2020 until 29th January 2021. This was worth 80% of average
monthly trading profits and paid like before. The fourth is set to cover the
next three-month period, from the start of February until the end of April.
However, the level of support available will not be published until the Spring
Budget, which takes place on 3rd March 2021.
Whilst
the support from the government has been welcomed with open arms, by most, it
is worth noting that these grants are taxable. Each grant should be reported on
your tax return, as income, in the accounting period they were received. This
means there may be tax and NIC due on these payments and therefore it may
impact your tax liability due 31 January 2022.
The extension of the Self-Assessment
filing deadline
If this
wasn’t enough, sole traders were also made exempt from a late
filing penalty, provided that they filed online by 28th February 2021. However, this
has proved somewhat confusing as self-employed individuals were still expected to pay their tax bill by
31st January.
Any
individuals that failed to do so would be charged interest from 1st February on
any late payments. This became even more costly if you delayed your payment on
account from July 2020 (another COVID-19
response measure), as the two payments were both due on 31st January 2021 and each
accrued interest.
Important
change to be aware of
In a
further curveball announced 19th February HMRC confirmed that the
initial 5% late payment penalty on self-assessed tax would not be charged as
long as the tax is paid, or a time to pay arrangement is agreed by 1st
April 2021. The self-assessment timeline is now
- 31 January – Normal Self-Assessment deadline (paying and filing)
- 1 February – interest accrues on any outstanding tax bills
- 28 February – last date to file any late tax returns to avoid a late filing penalty
- 1 April – last date to pay any outstanding tax or make a Time to Pay arrangement, to avoid a late payment surcharge
- 1 April – last date to set up a self-serve Time to Pay arrangement online
If
you’re unable to pay your tax bill in time, the government is advising you to pay in instalments. This enables you to spread the cost
of your tax bill over a few months. Bear in mind that you must owe £30,000 or
less and have no other payment plans or debts with HMRC. Your tax returns must
be up to date, and you also have to sign up before 1st April 2021.
It’s worth noting that you’ll have to pay interest too.
As there
is currently no information concerning the rules for the fourth SEISS grant, we
here at GoSimpleTax are urging all our users to submit their tax return
immediately. After all, there’s a strong possibility that they could determine
your eligibility, and you must do it in order to set up a payment plan.
How taxpayers might pay for the
support
Of
course, to reap back the money spent on this support, it’s expected that the
government will need to introduce significant tax measures. While it has
already been suggested that the Chancellor won’t want to introduce any that will impact spending, rumours of changes to National
Insurance, fuel duty and pension relief have all continued to circulate.
A new tax aimed at online
sellers has
also made many prediction lists in the run-up to the Spring Budget. Some of
these sellers have seen an increase in demand over the pandemic compared to the
high street. By introducing new charges, the government may hope to redress the
balance.
In the
meantime, it’s important that all Self-Assessment users keep a keen eye on the
latest support. While filing your tax return may help secure your eligibility,
there’s no guarantee that you'll still qualify despite claiming the previous
three grants. Keeping yourself well informed will help you to know where you
stand.
About
GoSimpleTax
GoSimpleTax software submits
directly to HMRC and is the solution for freelancers to log all their income
and expenses. The software will provide you
with hints and tips that could save you money on allowances and expenses you
may have missed.
Get started today, it is free to try -
add up to five income and expense transactions per month and see your tax
liability in real time at no cost to you. Pay only when you are ready to submit
or use other key features such as receipt uploading.discoun
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