What are the penalties for filing a late tax return?

Filing a tax return is a legal requirement for everyone liable to pay taxes. In the UK, the deadline for filing a tax return is 31st January. If you miss this deadline, you may have to pay a penalty. Awareness of the penalties for late tax return filings is essential.

What happens if you're late filing your tax return?

The deadline for filing a tax return in the UK is 31st January. If you miss this deadline, you'll have to pay the penalty. The penalty amount depends on how late you are in filing your return.

If you're less than three months late in filing your return, you'll have to pay a penalty of £100. You'll have to pay additional penalties if you're more than three months late. These penalties can go up to £1,600, depending on how late you file your return.

If you're more than 12 months late in filing your tax return, you may also have to pay a penalty of up to 100% of the tax due. This means that you may have to pay twice the tax you owe.

Reasons you might receive a penalty

You might receive a penalty for filing a late tax return in the UK for several reasons. Some common reasons include the following:

• You didn't know that you needed to file a tax return
• You forgot to file your tax return
• You didn't receive a reminder from HMRC
• You were too busy or had an emergency that prevented you from filing on time
• It's important to note that none of these reasons is considered reasonable excuses for not filing your tax return on time. HMRC expects you to file your tax return on time, regardless of any other circumstances.

What happens if you pay your tax bill late?

You'll also have to pay the penalty if you don't pay your tax bill on time. The penalty for late payment of tax is calculated as a percentage of the amount you owe. The percentage increases the longer you take to pay your tax bill.

If you pay your tax bill within 30 days of the payment deadline, you'll usually not have to pay the penalty. However, if you're more than 30 days late in paying your tax bill, you'll have to pay a penalty of 5% of the amount you owe. This penalty increases by an additional 5% for every other 30 days that you're late in paying your tax bill.

Penalties for late tax returns

As mentioned earlier, you'll have to pay the penalty if you're late filing your tax return in the UK. The penalty amount depends on how late you are in filing your return.

If you're less than three months late in filing your return, you'll have to pay a penalty of £100. You'll have to pay additional penalties if you're more than three months late. These penalties can go up to £1,600, depending on how late you file your return.

If you're more than 12 months late in filing your tax return, you may also have to pay a penalty of up to 100% of the tax due. This means that you may have to pay twice the tax you owe.

Penalties for late payment of tax

You'll also have to pay the penalty if you don't pay your tax bill on time. The penalty for late payment of tax is calculated as a percentage of the amount that you owe. The percentage increases the longer you take to pay your tax bill.

If you pay your tax bill within 30 days of the payment deadline, you'll usually not have to pay the penalty. However, if you're more than 30 days late in paying your tax bill, you'll have to pay a penalty of 5% of the amount you owe. This penalty increases by an additional 5% for every other 30 days you're late paying your tax bill.

Penalties for errors

If you make an error in your tax return, you may also have to pay the penalty. The penalty amount will depend on the type of error and whether it was made deliberately or not.

If you make a mistake on your tax return, you must correct it immediately. If HMRC discovers the error before you correct it, you may have to pay the penalty. The penalty for a mistake in your tax return can range from 0% to 100% of the tax due, depending on the nature of the error and whether it was deliberate.

It's important to note that errors can occur due to unintentional negligence, and HMRC may treat them more leniently. However, if a mistake was made intentionally or recklessly, the penalty can be up to 100% of the tax due.

What is a reasonable excuse?

A reasonable excuse is a circumstance that prevents you from filing your tax return or paying your tax bill on time. HMRC acknowledges that some situations, such as an unexpected illness or bereavement, can make it challenging to meet the deadline.

Examples of reasonable excuses include:

• A serious illness or injury
• A family bereavement
• A natural disaster or fire
• Computer or software failure
• Theft or burglary
• Postal delays that couldn't be anticipated

However, it's important to note that a lack of awareness or forgetfulness is not a reasonable excuse. Also, it's your responsibility to have a contingency plan in place if you face any unforeseen circumstances that can delay filing your return.

When can HMRC reduce my penalty (‘special reduction’)?

HMRC may reduce your penalty if they consider that mitigating circumstances led to you missing the deadline. This is known as a 'special reduction.’

The factors that HMRC may consider while reducing your penalty include the following:

• The length of the delay
• Whether you have a good compliance history
• The seriousness of the circumstances that led to the delay
• Whether you have taken reasonable steps to rectify the situation
• If HMRC agrees to reduce your penalty, it can reduce it to nil or reduce the penalty amount.

Conclusion

It's essential to file your tax return and pay your tax bill on time to avoid penalties. If you miss the deadline, you may have to pay a penalty of up to 100% of the tax due. If you have a reasonable excuse, HMRC may reduce your penalty. Understand the penalty system and the appeal process to handle any penalties charged by HMRC.