The latest legislation relating to self assessment penalties was introduced in the Finance Act, 2009. In practice, it means you can be fined for failing to meet your self assessment obligations – including notifying HMRC of your liability for tax, filing your tax return, and paying the tax due on time.
The penalty regime is designed to deter late submissions and payment. Incremental increases in penalty amounts mean that fines increase the longer you take to submit your tax return or make a payment once the 2017/18 deadlines have passed.
Notifying chargeability for tax
If you’re new in business or didn’t file a tax return last year, you’ll need to notify HMRC of your chargeability for tax. Failing to do this, or late notification, could incur a penalty based on your tax liability, but also on HMRC’s view of your behaviour – whether they believe failing to notify them was deliberate.
Penalties for late filing
Filing your tax return late incurs penalties on the following timescale:
- Filing deadline missed by one day up to three months: £100
- Three months late: £10 per day up to 90 days (or a maximum of £900)
- Six months late: 5% of the tax due, or £300 if that is the greater amount
- 12 months late: as for six months, unless HMRC believe your actions are deliberately undermining their ability to assess your tax position
Late payment fines
If you fail to meet the tax payment deadline, the following penalties apply:
- 30 days late: 5% of the tax due
- 6 months late: a further 5% of overdue tax
- 12 months late: another 5% of the tax due
- Late payment interest on the amount outstanding is also charged on a daily basis
Penalties for tax return errors
Penalties for making a mistake on your tax return are based on four possibilities:
- You made a genuine mistake and took reasonable care when completing your tax return: no penalty
- You failed to take reasonable care and made a careless error: between zero and 30% of lost HMRC revenue
- You made a deliberate error, but didn’t attempt to conceal it: between 20% and 70% of the lost revenue
- You made a deliberate error and also tried to conceal it: between 30% and 100% of the revenue lost to HMRC
Self assessment penalties and interest charged
Interest is charged not only on the amount of tax owed when you pay late, but also on the penalties and fines imposed for late payment. This currently stands at a rate of 3% (from 21st November 2017).
This can considerably increase your liability over the long-term, and it’s advisable to contact HMRC as soon as you become aware that you won’t be able to fulfil your self assessment obligations.
Alternatively, finding a local tax accountant experienced in dealing with HMRC can be a huge benefit. They’ll be able to make contact on your behalf, and if necessary, negotiate with HMRC for additional time to pay.
If you feel that you’ve been penalised incorrectly, you or your accountant can also make an appeal for it to be set aside, or refunded if you’ve already paid. So how can you make an appeal against self assessment penalties?
Appealing against self assessment fines
You’ll need to download and complete a penalty appeal Form SA370 to appeal against penalties for late filing or late payment, but you must do this within 30 days of the penalty notice date.
The address to send your penalty appeal will be printed on the penalty notice, or you can send it to:
HM Revenue and Customs
Handpicked Accountants can help you find a qualified accountant in your area. Our recommendations are based on long-term working relationships with accountants and accountancy practices around the country – we can verify their high service levels and technical expertise, so you don’t need to worry. Call one of the expert team at Handpicked Accountants to find out more about how we can help.