What are the Personal Tax Return Penalties?

Personal Tax Return Penalties

HMRC will issue personal tax return penalties for late filing and late payment of any tax liabilities due.

As accountants and tax advisors we strongly recommend that you file your personal tax return on time. However, should this not be possible, below are the penalties you can expect to be issued by HMRC.

Late Filing of Tax Return Penalties

Personal tax returns are due to be filed by the 31st January each tax year. Should this deadline be missed the following late tax return penalties will arise:

1 day late:
A fixed penalty of £100 is issued if the tax return is up to 3 months late.

After 3 months:
A daily penalty of £10 per day is issued if the tax return is over 3 months late. This penalty is subject to a maximum of £900.

After 6 months:
A further penalty of 5% of the tax liability or £300, whichever is the greater is issued.

Over 12 months late:
Should the tax return still not be filed after 12 months, then a further penalty of 5% of the tax liability or £300, whichever is the greater is issued.

Example of Late Tax Return Penalties

Penalties for each late filing period must be included when calculating the total penalty due. For example if a tax return was filed over 12 months late the penalty would be as follows:

  • £100 penalty is issued for being 1 day late
  • £900 penalty is then issued as the maximum penalty after 3 months
  • £300 penalty is then issued for being over 6 months late (or 5% of tax due)
  • £300 penalty is then added for being over 12 months late (or 5% of tax due)

The total penalty for late filing of the tax return is £1,600.00. This penalty could be even higher depending on how much tax is actually due.

Late Tax Payment Penalties

Personal tax payments are due to be paid by 31st January each tax year. Should this deadline be missed the following late tax payment penalties will arise:

Over 30 days late:
A penalty of 5% of the amount of tax still unpaid is issued.

Over 6 months late:
A penalty of 5% of the amount of tax still unpaid is issued.

Over 12 months late:
A penalty of 5% of the amount of tax still unpaid is issued.

Example of Late Tax Payment Penalties

A personal tax liability of £10,000 was paid 14 months late. Therefore, this incurs all 3 late payment penalties of 5% giving a total percentage penalty of 15%.

As a result the penalty for late payment would be £1,500.00 (Calculated as tax due of £10,000 multiplied by penalty of 15%).

HMRC Calculator

HMRC have a useful calculator to estimate your tax return penalties. It includes both late filing and late payment penalties.

How to Minimise the Personal Tax Penalties?

Reading Time 3 minutes.

You’ve missed the 31st January tax deadline and don’t know what to do next? Below is our guide on how you can minimise your personal tax return penalties.

  1. Was a personal tax return actually required to be completed?

    Assuming there is no tax due, and all tax has been deducted at source (i.e PAYE), can the tax return filing demand be withdrawn. In some circumstances HMRC will agree to remove the need to file the tax return. As a result, any penalties issued will also be withdrawn.

  2. File the tax return within the next 3 months

    Late filing penalties of £100 arise for being 1 day late. However, the late filing penalty remains at £100 up to 3 months late. It is important to use this window of 3 months wisely and ensure that the tax return is filed within this period. Failure to do so will be costly as after 3 months the late filing penalty increases to £10 a day. Get your tax return quote!

  3. File a provisional tax return

    In some circumstances it may be possible to file a provisional tax return which can be amended at a later date. The late filing penalty, will under certain conditions be based on the filing date of the provisional return.

  4. Make a payment on account to HMRC

    Late payment penalties arise on any unpaid tax liabilities. Therefore, our recommendation is to make a payment on account. Don’t wait for the tax return to be completed. Instead just make an estimate of your tax liability and pay this to HMRC. How to pay your Personal Tax liability.

  5. Phone HMRC and arrange a time to pay

    Late payment penalties don’t apply if a time to pay arrangement is agreed in advance with HMRC. Should you be struggling to pay your personal tax due, phone HMRC on these contact details at the earliest opportunity.

Conclusion

Tax return penalties can be minimised.

Filing your tax return within 3 months of the 31st January deadline will restrict the late filing penalty to only £100.

Making a payment on account or requesting a time to pay arrangement will reduce the penalties for late payment of tax.

As Chartered Accountants we can assist you in successfully putting your personal tax affairs back on track and minimising the penalties. Please contact the Darlington office on 01325 508688 or the Bishop Auckland office on 01388 448208 and speak with a qualified accountant. Alternatively use our Quote page and we will respond typically within 1 working day.

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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