Important deadline is one week away
The tax return for 2020/21 must be filed by 31 January 2022. Any tax due is payable by the same date, but in some circumstances this can be spread over the next tax year instead. Why do individuals need to act quickly to take advantage of this?
31 January each year is the filing deadline for self-assessment tax returns. Any underpaid tax (taking into account any payments on account) must be paid by the same date, or the individual can become liable to penalties and interest. However, where the amount owed doesn't exceed £3,000 it is possible for them to elect to have the underpayment collected through their PAYE code for the next new tax year, i.e. 2022/23 for 2020/21 underpayments.
Obviously, this requires there to be an employment or private pension so that HMRC can apply the adjustment to the PAYE code. However, there is a further condition that must be met before the "coding out" can operate. The tax return must be filed no later than 30 December, i.e. just over a month ahead of the standard deadline. Anyone wishing to have their 2020/21 tax collected via PAYE must file their return within the next week, and indicate that they wish to have the tax collected via the PAYE code on the return.
If the deadline is missed, the individual can apply to HMRC for a payment plan. However, this is likely to be for six months at most unless there are exceptional circumstances, and interest will accrue on the unpaid amounts from 1 February.
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