Self Assessment Penalties
Filing your Self Assessment tax return on time can help you avoid penalties from HMRC. These penalties can quickly add up, leaving you with more stress than just paying your tax bill.
What Happens if You’re Late Filing Your Tax Return
If you miss the Self Assessment deadline, HMRC automatically charges a £100 fine, even if you don’t owe any tax. The deadline for paper tax returns is 31st October 2024, and for online returns, its 31st January 2025. Here’s how the penalties increase:
- 1 day late: £100 fine.
- 3 months late: £10 per day (up to £900), plus the initial £100 fine.
- 6 months late: £300 or 5% of the tax due, whichever is higher.
- 12 months late: Another £300 or 5% of the tax owed, and in serious cases, 100% of the tax due.
If you are in a business partnership, all partners can be penalised if your partnership tax return is late. Therefore, you must file on time.
Penalties for Late Tax Payments
The penalties for late payments are separate from those for late filing. You need to pay any outstanding tax by 31st January 2025. Here’s how penalties for late payments work:
- After 30 days: 5% of the tax due.
- After 6 Months: Another 5% of the outstanding amount.
- After 12 months: An additional 5%.
Late payment interest, currently at 7.25%, starts from the day after the payment deadline and adds up until you settle your bill. Rates are subject to change.
For example: If you owe £2,000 in tax and file your return six months late, you could face penalties of up to £400 (£300 minimum for six months) plus late payment surcharges and interest.
What If You Make a Mistake?
If you make a mistake on your tax return, HMRC may issue penalties depending on the severity:
- Carelessness: 0% to 30% of the extra tax due.
- Deliberate understatement: 20% to 70%.
- Deliberate and concealed errors: 30% to 100%.
If HMRC believes you took reasonable care in preparing your return, you may not face any penalties. However, if you realise you have made a mistake after submission, you can correct it within 12 months without penalty.
Reasonable Excuses for Filing Late
There are times when life gets in the way, and HMRC does accept certain “reasonable excuses” for missing deadlines. Example include:
- The death of a close partner.
- An unexpected hospital stay.
- A fire or service outage that prevents you from filing.
These excuses are considered on a case-by-case basis, and if accepted, HMRC may waive your penalties.
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