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Personal tax returns: don't pay the penalty


Personal tax returns: don’t pay the penalty

One of 2015’s biggest tax news headlines came when the Chancellor announced ‘the end of the tax return’ during Budget 2015. The announcement caused quite a stir in the financial world – and with good reason. If the government sticks to its forecast, end-of-year paper tax returns will be a thing of the past by 2020.

By early 2016 the country’s 5 million small businesses along with 10 million individuals will be the first to have access to a digital tax account. This will remove the need to file annual returns, and therefore remove the potential for late filing penalties.

Until then the possibility of being fined remains, and even if you get early access to a digital tax account you’ve still got one more return to submit. With this in mind, we thought it’d be a good idea to give you a reminder of how late filing penalties work.

Late filing penalties

HMRC will hit you with penalties if you fail to submit your return by the deadline. The charges will increase in severity the longer you take to file your return. Note that for partnerships, the following charges apply to late filing of both individual tax returns and partnership tax returns.

·         Missing the deadline

HMRC will issue an automatic £100 penalty if you submit your return 1 minute later than the deadline.

·         Submitting 3 months late

If no return has been sent within 3 months, you will be charged £10 per day for a maximum period of 90 days. Waiting until the end of this period will mean that you have paid £1,000 in late filing charges (including the initial automatic penalty).

·         Submitting 6 months late

A further charge will occur should you miss the deadline by more than 6 months. This will either be a £300 fine or 5% of the tax owed (whichever is greater).

 ·        Submitting 1 year late

The charge levied at the 6 month mark (£300 or 5% of tax) is repeated if HMRC has still not received your return. Assuming that HMRC charged you £300 previously, you will now have to pay a total of £1,600 in penalties.

·         Submitting 1 year and deliberately withholding information

If HMRC acquires evidence that you have deliberately concealed information, you’ll be hit by a charge amounting to up to 100% of your tax bill – doubling the original amount owed. Deliberating withholding information but not concealing information will mitigate the charge slightly (up to 70% of the tax owed).

Late payment penalties

Charges for late tax are slightly less severe than those for late filing but that’s not to say that you should be any less concerned about being in arrears with the revenue. HMRC will mete out the following late payment charges:

·         Paying 30 days late

HMRC will fine you 5% of the total tax due.

·         Paying 6 months late

Another 5% of your tax bill will accrue on top of the original charge.

 ·     Paying 1 year late

A further 5% will be charged for payments more than 1 year overdue.

Contact us

With careful planning and a good understanding of the submission process, there is no reason to be on the receiving end of a punitive fine. Calling upon our expertise will ensure that you avoid any nasty surprises next February.

Contact us on 01628 631 056 or email joyc@knightandcompany.co.uk for assistance with your personal tax returns.