Four million tax returns remain outstanding as cost-of-living crisis intensifies
The number of online searches using the phrase “can’t pay tax” surged ninefold in response to renewed commitments to increase national insurance by 1.25 per cent in April, despite a crippling cost of living rise.
Online tax calculator Income Tax UK found the “unprecedented rise” corresponded to the planned health and social care levy – set to create £12bn worth of ring-fenced revenue – being reconfirmed this week.
The news comes just days before the self-assessment deadline on 31 January. Payment dates for tax due for the 2020/21 financial year have already been extended in the face of economic turbulence. At the time of writing, approximately four million self-assessments were still outstanding.
As pressure mounts to delay the national insurance increase in a bid to ease pressure for the coming tax year, a number of economics experts have suggested that chancellor Rishi Sunak had the “fiscal room” to delay April’s tax hike during a cost of living crisis which has resulted in a current rate of inflation hasn’t been seen in three decades. Predictions out this week suggest energy bills could rise by a further 50 per cent in April as the cap on bills is pushed up in response to mounting wholesale gas costs.
“The latest data on the public finances show that, between April and December, the UK government borrowed nearly £13bn less than the [Office for Budget Responsibility] had forecast,” says Julian Jessop, economics fellow at the Institute of Economic Affairs (IEA) think tank. “This provides the ‘fiscal room’ to ditch the hike.
“The economy has recovered more quickly than expected, creating a ‘growth dividend’ for the Treasury. Higher inflation is increasing the amount that the government has to spend on interest payments on inflation index-linked debt. However, the accompanying rise in nominal incomes is also increasing tax revenues and reducing the burden of debt as a share of GDP.
“The government may still need to find more money later to fund a long-term increase in spending on health and social care. But the NICs hike in 2022/23 was intended to help with the one-off costs of fixing the backlog of NHS work caused by the pandemic.
“It is therefore entirely credible to use the growth dividend to pay these costs, rather than adding even more to the tax burden by raising NICs now.”
Meanwhile, HMRC is urging the four million customers – of the 12.2 million expected to submit a return for the last tax year – to file theirs, as well as pay any outstanding liabilities or set up a payment plan ahead of the 31 January deadline.
Although HMRC confirmed it would waive penalties for late filing of tax returns and late payments earlier this month, interest will still be applied to all outstanding balances from 1 February.
The changes mean anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file by 28 February and that anyone who cannot pay their tax liabilities by the January deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April.
As the 2020/21 tax return covers earnings and payments during the pandemic, taxpayers will need to declare if they received any grants or payments from the Covid-19 support schemes up to 5 April 2021 on their self-assessment, as these are taxable.
They include payments from the self-employment income support scheme, coronavirus job retention scheme and other Covid-19 grants and support such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme
The £500 one-off payment for working households receiving tax credits should not be reported in self-assessment. If customers owe more than £30,000, or need longer to pay, they should call the Self-Assessment Payment Helpline on 0300 200 3822.
A full list of the payment methods taxpayers can use to pay their self-assessment tax bill is available on GOV.UK.
But deadlines and payments aren’t the only challenges faced by stressed, time- and cash- poor taxpayers as HMRC has also issued fresh warnings over fraudsters posing as Revenue staff.
Taxpayers should be particularly alert if they are contacted out of the blue by someone asking for money or personal information, regardless of whether they claim to be from HMRC or not.
Warning signs include using pressure tactics to push victims to divulge personal details and/or to make payments over the phone. Anyone receiving an unexpected call demanding payment should refuse to provide any details, hang up, and contact HMRC independently – ideally from a different phone.
Meanwhile, taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for filing their tax return online securely and free of charge. If in doubt, HMRC advises not to reply directly to anything suspicious, but to contact the department straight away and to search GOV.UK for “HMRC scams”.