Penalties for Late Tax Filing & How to Avoid Them

We’ve all been there. Christmas is over and the New Year has just begun… Unfortunately that means the clock really is ticking for you to get your self assessment tax return submitted.

Nearly four million of the 10.2 million people in Britain required to fill in a self assessment tax return have not yet sent them in. Failure to complete your tax return in time for the deadline of 31 January will result in some pretty hefty late filing fines. Since the deadline for submitting a paper tax return was 31 October, the only remaining option is to submit your return online to avoid late filing penalties.

Late Filing Penalties:

Here is a quick rundown on the potential penalties for filing your tax return late:

If you miss the deadline of 31 January you will automatically be fined £100 as a late filing penalty.
If your return is 3 months late, you will be fined £10 a day for 90 days. This can result in a maximum penalty of £900 in late payment penalties.
If 6 months late, a further penalty of five percent of the tax due or £300, if greater, will be added as a late payment penalty.
And finally if 12 months late, a further penalty of five percent of the tax due or £300, if greater, will be added.

Submission After The Deadline	£100 Fine
3 Months Late	£10 a day up to £900
6 Months Late	£300 or 5% of the tax due
12 Months Late	£300 or 5% of the tax due

*All penalties are additional to the former.

A full breakdown of penalties can be found on the gov.uk website.

If you fail to pay tax on time, additional penalties may apply. However, if you have a reasonable excuse for late filing, you may be able to appeal the penalties.

How To Avoid Late Filing Penalties

But don’t worry! There’s no need to panic just yet, there’s still time. To ensure you meet the deadline for your self-assessment, we’d like to offer you our top three pieces of advice.

Firstly, get your papers in order. We understand this is a chore, but unfortunately, it is a necessity. Listed below are what you’ll need to have to hand (if applicable):

A P60 form from your employer showing your income and the tax paid on it
A P45 if you have left a job within a tax year
A P11D or P9D detailing benefits and expenses

You will also need to provide details on any other kind of income you may have. This can include things such as interest on your bank/building society accounts, dividends and investments, which contribute to your tax liability.

Secondly, if you value your sanity then we recommend you don’t call HMRC. The Public Accounts Committee conducted research that revealed that only 50% of calls made in the first half of 2015 were actually answered by HMRC. If you were lucky enough to have your call answered, you would have a 1 in 3 chance of not having to wait over 5 minutes to speak with someone.
Our last piece of advice is to get an online account with HMRC. Since by now you would have missed the deadline for paper returns – you will need a HMRC website login (if you don’t have one already). Please note that when you sign up for an account you will have to wait 7 days to receive an activation code in the post. You cannot submit your tax return without it.

What to do if you have received a penalty for filing taxes late

If you’ve unfortunately received a penalty for filing your tax return late, there are still steps you can take to address the situation and mitigate any further issues. It’s crucial not to ignore the penalty notice, as this could lead to more significant problems down the line.

Firstly, assess the penalty notice carefully. Ensure that all the details are correct, including your personal information and the amount specified. Mistakes can happen, and it’s better to spot them early. If you believe there has been an error, you should contact HMRC immediately to rectify it.

Next, if the penalty is valid, it’s time to act promptly to minimise further charges. Paying the penalty as soon as possible will prevent additional interest from accruing. HMRC offers various payment options, including online, by phone, or at your bank, making it convenient to settle the amount quickly.

If you’re facing financial difficulties and cannot afford to pay the penalty in one go, don’t panic. HMRC is often willing to work out a payment plan that allows you to pay in instalments. It’s vital to communicate with them and explain your situation rather than avoiding the issue.

Reasonable excuse

Additionally, if you have a reasonable excuse for filing late, such as a serious illness or bereavement, you may appeal against the penalty. You will need to provide evidence to support your claim, and HMRC will consider whether to cancel or reduce the penalty based on your circumstances.

For future peace of mind, consider setting up reminders and organising your tax documents throughout the year. This can help ensure that you’re well-prepared when the next tax filing deadline approaches. Utilising software or apps designed for tax management can also make the process more manageable.

Remember, tax penalties for late filing can be substantial, but they’re avoidable with careful planning and timely action. If you need professional assistance, don’t hesitate to reach out to us. We’re here to help you navigate the complexities of tax returns and avoid any future penalties. Contact us today to discuss how we can support you.