Landlords who can’t complete a self-assessment tax return by the deadline due to the impact of the coronavirus pandemic can put forward COVID-19 as a reasonable excuse for late filing, says HM Revenue & Customs.
HMRC will still issue an automatic £100 late-filing penalty if the January 31 deadline is missed, but landlords and other taxpayers can appeal if they can show the delay is due to COVID-19.
The government needs to bolster state finances by urging taxpayers to file a return and pay their taxes on time but recognises many can’t meet the deadline.
“We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of Covid-19 we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that,” said an HMRC spokesman.
“Support is in place for those who may struggle to pay with customers able to spread their payment liabilities of up to £30,000 over 12 months.”
- 1 Appealing a late filing penalty
- 2 Paying tax bills by instalments
- 3 Setting up a Time to Pay account
- 4 How to avoid tax late filing penalties
- 5 Landlord self-assessment FAQ
- 5.1 What property taxes are included in a self-assessment return?
- 5.2 What period does a tax return cover?
- 5.3 I haven’t rented out a home for a full tax year, what do I declare?
- 5.4 I live overseas and rent out a UK property – should I file a return?
- 5.5 What’s the tax filing deadline and when should I pay any tax due?
- 5.6 More information
Appealing a late filing penalty
The penalty appeal procedure demands taxpayers put forward a late-filing excuse as soon as they can and that the reason for the delay is directly connected to COVID-19.
Taxpayers have three months to present their appeal – until April 30, 2020.
HMRC does not give any examples of acceptable excuses and says each appeal will be decided on its own merits.
In the past, acceptable excuses include:
- Bereavement of a partner or close relative
- You are diagnosed with a serious illness
Both could be cited as COVID-19 excuses.
Data published separately by HMRC shows the tax authority expects 12.1 million self-assessment returns to be filed this tax season and that 6.6 million have already been delivered.
Most (93%) were filed on line, with the rest handed in on paper.
The deadline to file the return and pay any tax due is midnight on January 31, 2020.
Paying tax bills by instalments
Taxpayers who cannot afford to settle their bill in a single payment can set up an arrangement under HMRC’s Time to Pay facility.
Taxpayers can choose how much to pay each month or can put down a lump sum and pay the remainder by instalments under the scheme.
To qualify, they must:
- Owe tax of no more than £30,000
- Cannot have any other active payment plan with HMRC
- Have up-to-date tax filings
- Set up the account within 60 days of the payment deadline (April 1, 2021)
Interest is charged on the debt.
Setting up a Time to Pay account
Taxpayers can set up their Time to Pay account online or call HMRC on 0300 200 3822
Between 8am and 4pm Monday to Friday.
Time to Pay applies to income tax, but HMRC may consider a similar arrangement for landlords owing other taxes through the Payment Support Service.
Call 0300 200 3835 to discuss paying other taxes by instalments.
If you want to pay by instalment through either facility, HMRC will want to know:
- Your tax reference number (UTR)
- How much you owe and why you cannot pay
- Efforts you have made to raise money to settle your tax bill
- How much you can pay straight away and how much you can pay monthly to clear the balance
- Your bank account details
To answer these questions, you will need a list of personal income and expenses plus details of any savings or investments.
How to avoid tax late filing penalties
Professional tax advisers can help clients avoid self-assessment late-filing penalties with a simple trick.
The self-assessment return has a section that allows taxpayers to quote provisional figures if they do not have complete data available for the filing deadline.
The proviso is taxpayers can use provisional figures to estimate their tax if they can say when the full figures will be available.
So, fill in the tax return quoting the provisional figures and note how they were arrived at in the additional information box, along with when the final figures will be filed.
Calculate the tax due using the provisional data and pay any tax due by the deadline. If you pay too much, the excess will be refunded with interest, while if you pay too little, you will have to pay the extra plus interest.
However, you will not pick up the late-filing penalty.
Landlord self-assessment FAQ
Landlords must declare their rental profits as individuals or business partners every year on a self-assessment tax return.
Property companies have a separate tax filing regime.
Here are the answers to some of the most asked questions about landlord property tax.
What property taxes are included in a self-assessment return?
Landlords should declare several sources of income on their self-assessment returns:
- Rental income
- Gains from selling or gifting investment property
- Profits from property trading
- Rental income from holiday lets or second homes
- Rental income or gains from overseas property
Each category has a form for declaring any profits or gains (and losses).
What period does a tax return cover?
The tax period is the same every year – from April 6 to April 5 the following year inclusive of both dates.
I haven’t rented out a home for a full tax year, what do I declare?
Even if you only rented out a property for a few weeks in the tax year, you must include the financial information on a tax return for the appropriate period otherwise you could over or under pay tax for the year.
I live overseas and rent out a UK property – should I file a return?
Yes. It doesn’t matter where the landlord lives if they qualify to file a return, it’s where the property is located that counts. The same goes for capital gains tax if an overseas landlord sells a UK investment property.
What’s the tax filing deadline and when should I pay any tax due?
The filing deadline for the tax year ending April 5, 2020 is midnight on January 31, 2021. Any tax owed is due on that date, too.