New tax penalties

Opinion

New tax penalties

A new penalty regime for late filing and late payment of Income Tax through Self Assessment started in April and a tax return filed six months late could attract a penalty of at least £1,300.

The old £100 penalty was not much of a deterrent and the new penalties, which increase over time, aim to get people to submit returns as soon as possible.

The new penalties for filing a tax return late are - day one: an initial penalty of £100, even where there is no tax to pay or it has already been paid; three months late and there will be an automatic daily penalty of £10 per day, up to a maximum of £900; six months late the charge rises to the greater of 5 per cent of tax due or £300; twelve months late and offenders will be charged the greatest of 5 per cent of tax due or £300. In serious cases there is a higher penalty of up to 100 per cent of the tax due.

Penalties for paying tax late are - thirty days late: an initial penalty of 5 per cent of the tax unpaid at that date; six months late and a penalty of 5 per cent of the tax that is still unpaid; twelve months late and 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.

Penalties will be automatically sent to all Self Assessment taxpayers who do not file and pay on time. Taxpayers will be able to appeal against any penalty on the grounds that they have a reasonable excuse for not complying on time.

This was first published in April 2011

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