In this article, “Penalties for Self Assessment late filing and payment,” you will find a comprehensive overview of the penalties associated with late filing, late payment, notification failures, and errors in Self Assessment (SA) tax returns. Discover what penalties are due for outstanding tax returns and late payment. Gain insight into the fixed-rate and tax geared penalties for late filing, as well as the consequences of late payment. Additionally, learn about the appeal process and the considerations for appealing a tax penalty. Whether you’re a taxpayer or an advisor, this guide provides valuable information on SA tax penalties to ensure compliance and avoid unnecessary penalties.
Late Filing Penalties
If you’re running a business or have to file a tax return, it’s important to be aware of the Self Assessment late filing and payment penalties. The penalties can be automatic and are a mixture of fixed-rate and tax-geared penalties. Additionally, interest may be charged on any unpaid tax and penalties.
Automatic penalties for late filing
Penalties for Self Assessment late filing apply if you fail to submit your tax return by the deadline. The penalties can vary depending on the degree of lateness and your tax liability. For example, if you miss the filing deadline, you may be subject to an automatic penalty of £100. If you’re 30 days late, you could face a penalty of 5% of the tax due, and if you’re 6 months late, the penalty is either 5% of the tax due or £300, whichever is higher. The penalties continue to accrue the longer the return remains unfiled.
Mixture of fixed-rate and tax geared penalties
Penalties for Self Assessment late filing and payment can be a combination of fixed-rate penalties and tax-geared penalties. The specific penalties you face depend on how late your filing is and the amount of tax you owe. The penalties can range from daily penalties of £10 per day for up to 90 days to 5% of the tax due or £300, whichever is higher. It’s important to note that interest is charged on both unpaid tax and unpaid penalties.
Interest charged on unpaid tax and penalties
If you fail to pay your tax and penalties on time, interest will be charged on the amounts owed. The interest is calculated from the due date until the date the tax and penalties are paid in full. It’s crucial to make timely payments to avoid the accumulation of interest charges.
Penalties for Late Payment
In addition to Penalties for Self Assessment late filing, there are also penalties for late payment of tax. These penalties can accrue over time and can become quite significant if left unaddressed. However, there are options available to help manage these penalties.
Late payment penalties accrue over time
If you fail to pay your tax on time, late payment penalties can apply. These penalties are calculated as a percentage of the tax owed and can vary depending on the length of the delay. For example, if you don’t pay your tax by the specified deadline, a penalty of 5% of the tax due may be imposed. This penalty increases if the payment is further delayed.
Time to pay agreements
If you’re unable to pay your tax in full by the deadline, you may be eligible for a time to pay agreement with HM Revenue and Customs (HMRC). A time to pay agreement allows you to pay your tax in installments over an extended period. If you enter into a time to pay agreement, the penalties for late payment are suspended. However, it’s important to note that if you fail to adhere to the agreement, the penalties may become applicable.
Special reduction of penalties by HMRC
HMRC has the discretion to reduce penalties in certain cases. If you have special circumstances that prevented you from filing or paying on time, you may be eligible for a reduction in penalties. It’s essential to communicate your situation to HMRC and provide any necessary evidence to support your request for a penalty reduction.
Penalties for Failure to Notify
In addition to Penalties for Self Assessment late filing and payment, there are also penalties for failure to notify HMRC of chargeability to tax. These penalties are tax-geared and can be significant, so it’s crucial to be aware of your obligations and ensure timely notification.
Penalties for failure to notify chargeability
If you’re required to notify HMRC of your chargeability to tax and fail to do so, you may face penalties. These penalties are tax-geared, meaning they are determined based on the amount of tax that should have been paid. The penalties can be quite substantial, so it’s important to fulfill your obligations and notify HMRC in a timely manner.
Tax-geared penalties apply
The penalties for failure to notify chargeability are tax-geared, meaning they are based on the amount of tax owed. The specific percentage of the tax penalty depends on the circumstances of the failure and can range from 0% to 100% of the tax due. It’s important to understand your obligations and ensure you comply with the notification requirements to avoid these penalties.
Penalties for Errors in a Return
Mistakes happen, but when it comes to tax returns, errors can lead to penalties. It’s important to take care when preparing your tax return to minimize the risk of errors and understand the potential penalties that may apply.
Penalties for mistakes in a tax return
If you make a mistake on your tax return, you may be subject to penalties. These penalties are tax-geared, meaning they are based on the amount of tax that should have been paid. The specific percentage of the tax penalty depends on the circumstances of the error and can range from 0% to 100% of the tax due. It’s important to review your tax return carefully and seek professional advice if needed to avoid errors and potential penalties.
Tax-geared penalties apply
Similar to penalties for failure to notify chargeability, penalties for errors in a return are tax-geared. The penalties can be significant, depending on the amount of tax owed and the nature of the error. It’s crucial to ensure the accuracy of your tax return to avoid these penalties.
Late Filing Penalties Example
To illustrate how late filing penalties work, let’s consider an example. Imagine Mary, a self-employed software engineer, went traveling in south America in December 2022 and accidentally forgot to file her 2020-21 Self Assessment tax return. When she returned to the UK, she filed her return on March 1, 2023. As a result of her late filing, she received notifications of penalties from HMRC as follows:
- Missed filing deadline: £100
- Unfiled after 3 months: £10 per day for 90 days
- Unfiled after 6 months: £300
- Unfiled after 12 months: £300
Late filing penalties can accumulate over time if the tax return remains unfiled. In this example, Mary incurred penalties for various stages of lateness.
Late Payment Penalties Example
Now let’s consider an example to demonstrate how late payment penalties are applied. Mark was required to make a balancing payment of £8,000 in Income Tax under Self Assessment for the 2020-21 tax year. The payment was due on January 31, 2022. However, she had moved house and missed the payment reminders and eventually paid her tax March 2023. As a result, she incurred the following late payment penalties:
- Unpaid by midnight on March 2, 2023: £400 (5%)
- Unpaid by midnight on August 2, 2023: £400 (5%)
- Unpaid by midnight on February 2, 2024: £400 (5%)
Late payment penalties can accrue over time and increase the total amount owed. It’s important to make timely payments to avoid these penalties.
Late Payment Time to Pay Agreements
If you’re unable to pay your tax in full by the deadline, a time to pay agreement with HMRC may be an option. This agreement allows you to make installment payments over an extended period. One of the benefits of a time to pay agreement is that it suspends any penalties for late payment. However, it’s crucial to fulfill your obligations under the agreement to avoid penalties being imposed.
Penalties are suspended if a Time to Pay agreement is made
When you enter into a time to pay agreement with HMRC, any penalties for late payment are suspended. This provides you with an opportunity to manage your tax liabilities more effectively and avoid additional penalties.
Penalties become applicable if the agreement is broken
It’s important to adhere to the terms of your time to pay agreement to avoid penalties. If you break the agreement by failing to make the agreed-upon payments, the penalties for late payment may become applicable again. It’s crucial to fulfill your obligations under the agreement to avoid any further penalties.
Penalties for Self Assessment late filing and payment Appeals
If you believe that a Penalties for Self Assessment late filing and payment has been wrongly applied or want to contest a penalty, you have the right to appeal. It’s important to understand the process and grounds for appeal to effectively challenge a penalty.
Taxpayers have 30 days to lodge an appeal
Once you receive notification of a penalty, you have 30 days to lodge an appeal with HMRC. It’s important to act promptly and submit your appeal within the specified timeframe.
Late appeals may be accepted at the discretion of HMRC or the tribunal judge
While the 30-day timeframe is the general rule, HMRC has the discretion to accept late appeals in certain circumstances. Similarly, in appeal proceedings before a tribunal, the judge may also consider accepting a late appeal. However, it’s advisable to submit your appeal within the specified timeframe to avoid any complications.
Legislation and Small Print
To understand the full scope of Penalties for Self Assessment late filing and payment and how they are applied, it’s important to refer to the relevant legislation. The legislation governing tax penalties can be complex, and it’s advisable to seek professional advice if needed.
Overview of the legislation governing tax penalties
The legislation governing tax penalties is found in Schedule 24 FA 2007, Schedule 41 FA 2008, and Schedules 55 and 56 FA 2009. These schedules outline the various types of penalties, their calculation methods, and the appeal process. It’s recommended to review the legislation and ensure compliance to avoid any penalties.
In conclusion, being aware of the Penalties for Self Assessment late filing and payment, failure to notify, and errors in a tax return is essential for any individual or business. By understanding these penalties and taking steps to address any issues promptly, you can avoid unnecessary financial burdens and ensure compliance with tax obligations. Remember, HMRC has options available, such as time to pay agreements and penalty reductions, so it’s important to communicate with them if you encounter difficulties.