HMRC has warned taxpayers that the penalty for filing late tax returns is to rise significantly. The old fine of £100 is to be replaced because, the tax authority says, the previous penalty rate was not enough of a deterrent. The new penalty regime for late filing and late payment of self assessment income tax starts in April 2011 and applies to the tax year 2010/11.
The new penalties for filing self assessment tax returns late are:
One day late will mean an initial penalty of £100, even if there is no tax to pay or all the tax owed has been paid; three months late will mean an automatic daily penalty of £10 per day, up to a maximum of £900; six months late will mean further penalties, which are the greater of 5 per cent of tax due or £300; twelve months late will mean yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases, there could be a higher penalty of up to 100 per cent of the tax due.
Penalties for late payment of tax are:
One day late incurs an automatic fine of £100, thirty days late will involve an initial penalty of 5 per cent of the tax unpaid at that date; six months late will involve a further penalty of 5 per cent of the tax that is still unpaid; twelve months late will involve a further penalty of 5 per cent of the tax that is still unpaid. These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until the payment is received.
If you would like expert guidance on how best to plan your personal tax, so that you meet the rules but don’t pay more than you have to, please call us.