What tax return penalties could you face?

HMRC operates a harsh penalty system for the late filing of self-assessment tax returns. Unless you have a very good reason for missing the final deadline (here’s a few corkers which HMRC didn’t accept!) – 31 October for paper submissions and 31 January for online returns – you will be fined a minimum of £100.

This fine will apply even if you have no tax to pay – and even if you are only one day late. If your tax bill is calculated as £1000, this means you’ll end up paying £1,100 if you file your online tax return on 1 February.

Thereafter, you will incur an additional fine of‚£10 per day up to maximum 90 days. That’s a potential £900 plus the initial £100 flat late penalty fee. Your £1,000 tax bill has now doubled to £2,000.

Things get progressively worse, the longer you leave it to file your return. If you’re up to six months late, for example, you’ll be charged a further £300 or 5% of however much tax you owe, whichever is the higher sum – as well as the £1000 you already incurred at 90 days. Your £2,000 bill has now become £2,300.

Leave it a year and things get really bad. Now you’ll be liable for another £300 or 5% of your tax liability (whichever is higher). In exceptional cases, HMRC can raise the percentage to 100% of the amount of tax you owe. Your final bill will be between £2,600 and £3,300.

Remember, these figures are just for late filing of your tax return. A separate tariff of charges applies if you’re late with your payments to HMRC. These are:

• 5% after 30 days (i.e. £50 on a £1,000 tax bill, taking the total to £1,050)
• 5% after 6 months in addition to the above (£1,050 + 5% = £1102.50)
• 5% after 12 months in addition to the above (£1,102 + 5% = £1167.53)

These penalties are additional to HMRC’s flat rate of 3% interest that apply to late payment of tax and penalty fees.