Penalties for late tax returns

HMRC Issue record number of fines

Tax return form 2016

HMRC issued a record number of fines last year to taxpayers who made mistakes on their personal tax returns.

The Revenue imposed 143,000 penalties on people who filed inaccurate information because it deemed them not to have taken “reasonable care” – nearly three times the 55,000 fines levied in 2012. Taxpayers were also being penalised for oversights such as forgetting to declare the interest on an old savings account or omitting a health insurance policy received through work.

The penalty figures also showed a six-fold increase in the number of fines for deliberate understatement of income, from 5,000 in 2012 to nearly 30,000 last year. According to the Times, the figures are likely to raise concerns that the taxman is pursuing middle-earners with less complex tax affairs rather than the super-rich. However, HMRC denied that it was picking on easier cases, saying that anyone who made an innocent mistake on their return, and who took reasonable care, would not pay a penalty.

What are the penalties?

  1. You will be charged a penalty, even if you do not owe any tax.
  2. If you missed the filing dates of  31 October  following the end of the tax year (for paper returns) or 31 January next following (for on-line submission), you will be charged a penalty of £100, and this will not be refunded, even if no tax is owing. Eg. tax returns for the year to 5 April 2016, should have been filed on paper by 31 October 2016, or on-line by 31 January 2017
  3. If you are three months late, you will be charged a daily penalty of £10 per day, up to a maximum of £900
  4. If you  are six months late there will be a penalty of £300 (or 5% of the tax owing if this is greater)
  5. If you are 12 months late, you will be charged another £300 (or 5% of the tax owing if this is greater). In exceptional circumstances a higher penalty of up to 100% of the tax due is possible

Whilst the deadline of 31 January passed on Tuesday it still makes sense to complete and file any outstanding returns as soon as possible to mitigate the penalties above. Obviously if you do have a genuine reason for being late then it’s always worth asking the Inspector to waive any penalties on this occasion.

For any help in completing outstanding returns contact our personal tax team on 0845 177 5500 or using our on-line contact form.

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