More than 12.2 million tax payers were expected to complete a 2020-2021 UK self-assessment tax return. Despite an extension to the original deadline for payment, over a million freelancers, investors and landlords have failed to pay their tax bill on time. The negative financial impact of the pandemic can be identified as a main factor for this widespread delay in payment.
The pandemic heavily reduced revenue figures for a multitude of businesses, leaving the owners struggling to cover their financial liabilities, such as tax payments. The financial strain placed on contractors who were unable to secure substantial contracts during the pandemic, has led to many struggling to pay their tax bill.
Freelancers were a category severely hit by the pandemic, with the quality and quantity of their contracts becoming severely compromised. The Bounce Back loan available to contractors with their own limited company has been bittersweet, with those contractors now facing the additional burden of having to repay their loan. Contractors who successfully applied for the loan have been left with not only the consequences of repayment but also the inability of closing their limited company. This is since the option is no longer advantageous as a result of the activation of off payroll rules in the private sector.
HMRC responded to the financial pressure some people may be under, by announcing in January they would waive any penalties for one month of late filings or tax payments. One of their changes meant if people missed the initial deadline of January 31st, they would not be penalised if they paid by February 28th. Individuals would also not face any penalties if they paid their tax in full or created an arranged payment time by April 1st.
However, if an individual failed to meet any of the new changes previously mentioned, this would mean they could now face a £100 penalty fine. As well as this fine, a 3% interest charge would also be added to the total amount. This interest rate has jumped from 2.75% in the space of a few weeks due to rises in interest at the Bank of England.
HMRC are aware that people may incur circumstances which prevent them from paying their bill on time. For this they have dedicated helplines to call as well as online resources for people to use.
Umbrella Exchange have access to a wide range of hassle-free services that can help you with setting up a limited company or finding the right umbrella company for you. To talk to a member of our team, call: 0203 393 3881