Understanding the HMRC Penalties Regime
To encourage UK taxpayers to file their accounts and pay them on time, HMRC imposes penalties for a range of financial tax reporting misdemeanours.
These HMRC penalty charges range from late filing and payment fees to penalties for inaccurate returns and missing VAT deadlines. They include non-reporting of capital gains tax and failing to inform the tax office if your company should be paying Corporation Tax.
In this blog post, though, we are concentrating on HMRC penalty charges for self-employed individuals who pay tax via self-assessment. If you are filing online, the assessment is usually due at the end of January (i.e., before midnight on January 31) if you don't want to incur a fine.
HMRC late filing penalty self-assessment
This year, however, due to the difficulties around coronavirus restrictions, HMRC are allowing self-assessment taxpayers an additional month to file without being given a late filing penalty self-assessment charge. The deadline has been extended to February 28. If, after that point, a self-assessment form hasn't been filed, then penalties will begin to incur.
To date, around 6.5 million individuals out of a total of 12.2 million individuals definitely won't be subject to a late filing penalty self-assessment charge. That's because they have already filed their tax return for 2020 to 2021.
HMRC late payment penalty self-assessment
Meanwhile, those who can't pay their tax due in full by January 31 won't be given an HMRC penalty if they pay their tax in full or set up a Time to Pay arrangement by April 1. This means that tax of up to £30,000 can be paid in 12 instalments, if necessary. Those whose debt is larger or who need longer to repay can speak to a representative via the Self-Assessment Payment Helpline, tel: 0300 200 3822.
Since interest is charged from February 1, it's still a good idea to pay the entire amount upfront, if possible. If no Time to Pay scheme has been organised by April 1, then self-assessment taxpayers will be fined 5% on the outstanding amount of tax to pay. In 'normal years', the date for charging HMRC penalty interest on unpaid amounts is March 3.
Lucy Frazer, Financial Secretary to the Treasury, explained that the extended deadline for filing was as a result of the Omicron virus “putting people under pressure.” She added: “Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead.”
The 2020 to 2021 tax return is for the period most extensively covering the pandemic. Those who received payments from the Self-Employment Income Support Scheme to April 5, 2021, must declare them on their tax form. That's because they will be included as income and taxed accordingly.
There are occasions when HMRC late filing or payment penalties are waived. But these are usually in extreme circumstances, i.e., the taxpayer has a very good reason for not filing or paying on time (such as being in hospital). And, even then, it is up to HMRC's discretion.
Contact us
If the new extended deadlines or late payment and filing penalties have left you confused, then give us a call at Keith Graham Chartered Accountants today and speak to one of our friendly advisers.
Tel: 01252 312561 or drop us an email via info@keith-graham.co.uk