Penalties for submitting tax returns late

“To err is human, to forgive is divine”, so famously said the writer Alexander Pope  around three hundred years ago, but unfortunately HMRC are not known for their forgiveness when it comes to late submission of tax returns. With 31 January less than 2 weeks away now is a good time to have a look at the current system of penalties in place for lat filing of returns and late payment of tax due.

Filing Penalties

The basic penalty of £100 will be triggered if a return is not filed online  by midnight of 31 January. It is now too late to submit paper returns and if you want to use HMRC’s website you need to register first and wait for your activation code which will be posted to you, this may take up to two weeks so you need to register now. In the past the penalty was restricted to the amount of tax you had to pay, so if you had no tax liability then the penalty would be reduced to nil, unfortunately this is no longer the case.  The penalty for late filing of partnership returns is £100 per partner so say you and your wife were in partnership together and you missed the deadline for both your personal and partnership returns the total penalty would be £400. Subsequent penalties are outlined below, and as you can see are not to be taken lightly-


Penalties for missing the tax return deadline
Length of delay Penalty you will have to pay
1 day late A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late £10 for each following day – up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late £300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late £300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead.
These are as well as the penalties above.

Late payment of tax penalties

Late payment of the tax you owe also triggers interest and penalties even if you don’t know how much tax you have to pay yet. Interest is charged on overdue tax at 2.5% per year at the moment which doesn’t seem to bad, this would equate to around £2 per month on a tax bill of £1,000. However on top of this there are penalty surcharges of 5% of the tax unpaid at 30 days, 6 months and 12 months after the due date. So in the case of the £1,000 bill that would add up to around £160 if it was still outstanding after 12 months.  It is also likely that by this stage HMRC will have passed on your account to a debt collection agency. If you find yourself unable to pay what you owe I would recommend you ring the HMRC business payment support line on 0845 302 1435 and discuss setting up a payment plan to spread the repayments over a period that is affordable to you.  This will stop penalties being charges though not interest.