Tax Guides

A breakdown of late Self-Assessment fines and penalties

A breakdown of late Self-Assessment fines and penalties

*Please note the information in this article may be out of date

*HMRC COVID19 update 25th January 2020- Self-assessment customers will not receive a penalty for their late online tax return if they file by 28th of February. However any tax due for 2019-2020, that has not been paid on the 1st of February, will begin to incur interest. The usual rate is 2.6%. As penalties on tax owing do not begin until the 2nd March, this means that a return made before the 28th February will cost the taxpayer interest on tax owing, but no flat rate fine or penalty. In real terms, this is an extension to the deadline for those who owe little or no tax.

See our Guide on completing your Self Assessment Return.

If you miss the January 31st Self-Assessment deadline, you will be fined £100 for a late return. You have 30 days to pay your tax before 5% is charged on it. You have 90 days to get your return in after which it will cost you £10 a day in fines.

Here at Listentotaxman we know that many people required to make Self-Assessment returns end up incurring late penalties and charges without realising it was happening. Here we explain when and what those penalties will be if you miss the deadline.

OK, so you think you may be late in either making your tax return or paying the tax owed, or both. You are wondering what that decision may cost you. The example below shows that a late return can be a very costly mistake, regardless of the tax owing!

There are a couple of things to understand here. Firstly there are separate penalties for making a late return and for late payment of taxes owed. If you are late with both the return and tax owing you will be liable for penalties and charges on both. Secondly, these do not include interest. HMRC will charge interest on any tax owing and on the penalties and charges incurred as a result of the late payment of tax owed. Currently they charge interest at a rate of 3%. 

Penalties for Late Return of Self-Assessment (regardless of whether tax owing or not)

1st Feb 1 Day late = £100 fine from the 1st February. 

1st May, 3 Months late = £10 a day fine up to a maximum of £900 (90 days) for every day it is late

1st Aug 6 months late = £300 fine or 5% of the tax owing, which ever is greater.

1st Feb 12 months late = another £300 fine or 5% of the tax owing, which ever is greater.

Penalties for Late Payment of Tax Owing

1st March payment now 30 days late = 5% charge on the tax owing on that day

1st August payment now 6 months late = 5% charge on the tax owing on that day

1st Feb payment now 12 months late = 5% charge on the tax owing on that day.

Interest is charged on the tax owing including the amount levied in charges at a rate of 3%.

Let's take a sample case of, lets call him Mike the Disorganised. He knows he has to make a self-assessment return for 2018/19, and intends to get around to it one of these days. The fact he only owes about a hundred quid or so in tax means its nothing to worry about anyway! So Mike forget's/ loses forms/goes away for awhile/ sleeps a lot as its cold/ breaks up with girlfriend and sleeps a lot again, etc, for a year. How much will that £100 pounds in unpaid taxes cost him when he makes his 2018/19 Self-Assessment return over a year late on November 1st 2020?

For submitting the form late he will be liable for all the charges listed above so £1,300 in fines for late return

Interest for paying tax bill late = £2.06

Penalty for paying tax late = £10

Original tax bill = £100

Total estimated to pay = £1,412

Poor Mike the Disorganised will be paying a heavy price for being late with that return. It will cost him £1,412 instead of £100. Even if he had only managed to put the return in and not paid the taxes Mike would save himself a substantial sum of money. In cases where the tax owing is nominal, it will be the fines for late return that are the issue as they are quite severe, up to £1,300 in the first year. 

It should also be noted that if you make a return which is incorrect, and HMRC feel that you were either careless, or misleading them on the amount of tax you owe, they can charge a further 30% to 70% of the tax owing. In cases of deliberately concealing and misleading them they can charge 100% on top of the tax owed.

For more information on HMRC penalties and charges for late Self Assessment returns, click here.