What happens if you don’t file your tax return on time?
You should have filed your 2023 Personal Tax Return and Partnership Tax Returns by 31 January 2024. If you did not file on time HMRC will charge an automatic £100 penalty to individuals.
For a late submission of a partnership tax return, penalties are issued to the partnership and the individual partners.
HMRC can also apply additional daily penalties of £10 per day for returns which are more than three months late. These daily penalties apply for a maximum of 90 days (£900 maximum). For returns more than six months late, there will be an additional penalty of 5% of any liability to tax which would have been shown in the return or £300 if greater.
An additional penalty of 5% of any liability to tax (restricted to a maximum of £300) will also apply for returns more than 12 months late. If the return has not been submitted within 12 months
and by failing to make the return the taxpayer is deliberately withholding, but not concealing information, which would enable HMRC to assess the tax liability, the maximum amount of the penalty increases to 70% (restricted to a maximum of £300). If the withholding of information is deemed deliberate and concealed, the maximum amount of the penalty is 100% of the tax liability (restricted to a maximum of £300).
Interest on Tax Paid Late:
HMRC will apply late payment interest on any overdue tax, and this applies to both the balancing payment and any payments on account due. The interest will apply from the date the tax was due for payment until the date payment was made.
The rate is set at 2.5% above base rate. The current rate (as from August 2023) 7.75%. Interest is charged on a daily basis.
Penalties on Tax Paid Late:
HMRC will apply a penalty of 5% of the unpaid tax if the payment is more than 30 days late. A further 5% penalty will be applied on tax unpaid after six months of the original date. An additional 5% penalty will apply on tax unpaid after twelve months of the original date.
Payments on account paid late are only subject to late payment interest and do not attract late payment penalties. It may be tempting to make the claim to reduce your payments on account, however a claim should only be made if you consider your income will be lower than the previous year. If you reduce these payments by too much, you will incur interest on the shortfall from the due dates of payment.
It is also worth noting HMRC may charge a penalty if it they deem reasonable care has not been taken.
If you are unable to pay your tax liability, you can contact HMRC once your tax return has been submitted to negotiate a time to pay arrangement.
You can set up a self-assessment payment plan online if you:
- Have filed your latest tax return
- Owe £30,000 or less
- Are within 60 days of the payment deadline
- Do not have any other payment plans or debts with HMRC
For more advice on late tax payments and penalties contact our friendly tax compliance team who can guide you through the best course of action. Fill out our contact us form to get in touch with our tax team.