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Act now to avoid late payment penalties


Published: 10 Mar 2022 Update History

The 5% late payment penalty for self assessment income tax unpaid on 1 April 2022 can be avoided by setting up a time to pay arrangement by that date. ICAEW’s Tax Faculty explains.

Missing the payment deadline for paying self assessment income tax can be expensive.

Interest, now at 3%, is charged on a daily basis from the due date. It applies to payments on account and balancing payments. The waiver of late filing and late payment penalties for 2020/21 self assessment returns and payments does not alter this; interest is charged as normal.

The 5% late payment penalty often comes as more of a surprise to taxpayers, as it is charged if tax is outstanding on three particular trigger dates. These trigger dates are usually 30 days, six months and 12 months after the due date for the tax. The trigger date for the first late payment penalty for unpaid tax for 2020/21 has been extended from the usual 30 days to 1 April 2022.

The 5% penalty can be avoided by setting up a time to pay arrangement before the 1 April 2022 trigger date.

Taxpayers (but not agents) can set up a time to pay arrangement online if they owe £30,000 or less, can pay within 12 months and meet certain conditions. This online service will close for 2020/21 payments on 1 April 2022.

Those that cannot set up the arrangement online (because the amount due is too high or a longer-term arrangement is needed, for example) should phone HMRC on 0300 200 3822 to arrange time to pay.

Late payment penalties are not charged on payments on account, for instance, a first payment on account for 2021/22 which was due on 31 January 2022.

Tax Faculty

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