You will be issued with an automatic, initial penalty of £100. The fine is imposed regardless of whether you owe tax or not. If you fail to file within three months – that is, by the end of April – HMRC can then impose an additional £10 daily fine for the next 90 days, increasing the total penalty by £900 to £1,000. Further penalties are imposed after six and then 12 months – and these could be based on the amount of tax you owe if a particularly large sum is outstanding. On top of these fines, you’ll be charged interest on any unpaid tax.
HMRC says it will waive the late-filing penalty for people who have a “reasonable excuse”, although this will be done at officials’ discretion. You may be able to avoid a fine if a close relative died shortly before the Self-Assessment deadline, if you have been seriously ill, or even if you have experienced serious IT problems. Fines may also be waived or suspended if you’re unable to file your returns due to issues with HMRC’s online services. HMRC will not accept your excuse of being too busy to avoid the filing penalty.
To get your tax affairs in order you need to file your tax return as quickly as possible, as penalties escalate the longer the delay. It is important that, even if a reasonable excuse is established, the you file without unreasonable delay once the excuse has ceased.
HMRC have softened their approach for those with genuine excuses because they’re focusing on larger, deliberate tax evaders rather than ordinary people. This remains the case, but the excuse must be genuine and evidence may need to be presented.
Any tax liability for 2018/19 was due by 31st January 2020. If it is not paid within 30 days of the deadline, late payment penalties will start to accrue. Interest is charged for the entire period the tax is outstanding, and this cannot be mitigated.
If your tax bill is correct but you can’t afford it, contact HMRC as soon as possible to avoid further late payment penalties by coming to an arrangement to spread your payments over a period of time.
On a related matter, where tax payers are faced with inaccuracy penalties, which are chargeable if they submit an inaccurate return to HMRC that results in them understating their liability to tax or claiming too much by way of loss relief or repayment of tax. It can typically amount to 15 per cent of the tax understated. For a penalty to be properly chargeable, the mistake must be ‘careless’ or deliberate. ‘Careless’ indicates the taxpayer has failed to take reasonable care; what constitutes ‘reasonable’ depends on the individual’s particular circumstances and abilities.
If a mistake is not careless but a genuine error made while exercising reasonable care, HMRC are not entitled to charge a penalty at all. This is the case even if the person’s tax liability is understated as a result of the error.
You should focus your attentions on completing your tax return before the end of the February and paying any outstanding taxes owed for the 2018/19 year by this time to ensure late payment penalties do not apply to the unpaid taxes.
The advice in this column is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.