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1.8m taxpayers miss January self-assessment deadline.

That’s 15% of the 12.1 million returns expected for 2020 and double the number who were late last year.

Individuals whose tax return is now late will not be charged a late filing penalty provided they submit their return online by 28 February, but the return will still be treated as a late return.

Those who did not pay their self-assessment tax bill by 31 January are now incurring interest on the outstanding balance and should pay their bill as soon as possible.

HMRC says they should pay any outstanding balance, or arrange a payment plan, before 3 March to avoid a 5% late payment penalty.

Those who are not yet able to file their tax return should pay an estimated amount as soon as possible, which will minimise any interest and late payment penalty.

You can set up a payment plan over a maximum of 12 months, provided you have no outstanding tax returns, other tax debts, or other HMRC payment plans set up. Even if you do, you can phone HMRC and make a case for a new plan.

A return received online in February will be treated as a return “received late where there is a valid reasonable excuse for the lateness”. This means that:

  • there will be an extended enquiry window for HMRC to look into the return;
  • for returns filed after 28 February the other late filing penalties (daily penalties from 3 months, 6- and 12-month penalties) will operate as usual;
  • the payment deadline remains 31 January and interest will be charged on late payment. The current rate of late payment interest is 2.6%;
  • a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, before 3 March 2021. Further late payment penalties are charged at 6 and 12 months, on tax outstanding where a payment plan has not been set up.

Furloughing staff to look after children.

With schools closed, the challenge of trying to work while looking after children is being faced by many people.

Remember, employees are eligible to be furloughed under the Coronavirus Job Retention Scheme if they are unable to work or are working reduced hours because they have caring responsibilities resulting from COVID-19.

HMRC’s latest guidance clarifies that this includes caring for children who are at home as a result of school and childcare facilities closing.

Cycle to work scheme and COVID-19.

This is a benefit that many employers offer, even in the Highlands and Islands. However, for the benefit exemption to apply there is a critical condition, that may not be achievable at the moment. The cycling equipment provided should be used mainly for qualifying journeys (to or from work or in the course of work).

If you are working from home due to COVID-19, you may not be travelling to work, meaning that this benefit becomes taxable.

However, if you joined the Cycle to Work scheme on or before 20 December 2020 the benefit will not be taxable. This is a temporary change and will come to an end on 5 April 2022, after which the normal rules of the exemption will apply.

It appears that employees who join a scheme from 21 December 2020 will need to meet all the normal conditions of the exemption.

MTD for income tax – trading and property income

Self-employed individuals and landlords with annual business or property income above £10,000 will fall within MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

It is important to appreciate that it is the source of income that is mandated under MTD for Income Tax, not the individual taxpayer.

This means that individuals who are self-employed and also rent out property could have two separate mandated start dates. Partnerships, that also rent out property will be able to make a single submission.

Scottish Government delivers 2021–22 Budget Statement.

Scottish Parliament Finance Secretary Kate Forbes has delivered Scotland’s Budget Statement for 2021–22, but said that in the absence of a UK Budget, much of the necessary planning information is missing.

The structure of Scottish income tax will remain unchanged, while the starter, basic and higher rate bands will all increase by inflation for 2021–22. The top rate threshold will remain frozen at £150,000. This will see all Scottish taxpayers pay slightly less income tax next year than they will this year, based on their current income.

On Land and Buildings Transaction Tax (LBTT), the temporary change to the residential nil rate band introduced in July 2020 will end as planned, and the ceiling of the nil rate band will return to £145,000 from 1 April 2021, with no other changes to rates or bands.

LBTT first-time buyer relief will remain in place, saving first-time buyers up to £600 and meaning that an estimated 8 out of 10 first-time buyers will pay no tax at all.

The LBTT Additional Dwelling Supplement (ADS) rate will remain at 4 per cent for 2021–22. However, the Scottish Government intends to consult early in the next Parliament on reforms to the ADS.

Non-residential LBTT rates and bands will remain unchanged.

Finally, on Scottish Landfill Tax (SLfT), the standard rate of Scottish landfill tax will rise to £96.70 per tonne and the lower rate to £3.10 per tonne in 2021–22.

BEIS to build UK-wide business subsidy regime.

The Department for Business, Energy and Industrial Strategy (BEIS) has set out plans for a new UK-wide subsidy control system, to replace the EU state aid regime, which it says will provide more flexible and tailored financial support to businesses.

Local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast will be empowered to decide if they can issue taxpayer subsidies by following a set of UK-wide principles.

The new system is intended to be more flexible, agile and tailored to support business growth and innovation as well as maintain a competitive market economy and protect the UK internal market. At the same time, it will help protect against wasteful spending.

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