How is your self-assessment tax affected by Coronavirus?
Due to the government’s measures to keep the economy running during the coronavirus pandemic, the 31st January 2020 is set to be a Self Assessment deadline unlike anything we’ve seen before. Following on from my recent blog on the subject, HMRC and HM Treasury have made unprecedented changes to the tax system to support taxpayers, but how is it likely to affect your self-assessment in the long run?
The principal effect for self-assessment taxpayers (self-employed, landlords, company directors, members of partnerships and so forth) relates to the Chancellor’s announcement that if you are due to make a payment on account on the 31st July 2020, you can defer this to the 31st January 2021. You don’t need to tell HMRC that you’re deferring the payment, and they will not charge any of the normal interest and penalties for late payment as long as it is made in full either on or before 31st January 2021.
However, it’s worth remembering that in terms of cashflow, pushing your payment on account back to January, you will effectively have to pay what you owe HMRC all in one month, which will potentially cause greater harm to your cash flow in the long run. This can be avoided by mapping out your finances ahead of time.
Also, see my blog on how you can use lockdown to your advantage in getting your taxes sorted early this year. The earlier you file your 2019/20 Self Assessment tax return, the sooner you’ll know how much you will owe come 31st January 2021 (especially if you’ve deferred your July payment on account).
Finally, it’s worth remembering that if lockdown means you’re now working from home, you could also stand to make further savings on your 2020/21 tax bill. Start by monitoring your utility and phone bills. You can claim a proportion of certain bills as expenses, provided they’re deemed ‘allowable’ and are for business purposes.