Insights

If paying your tax bill and parting with hard earned cash seems a nuisance, giving HMRC an extra £100 must be even more so. According to data just released by HMRC, it generated an extra £110million overnight, just because people were late to file their self-assessment tax returns this January 2024.

What happens if your tax return is filed late?

Tax returns and any tax payable must be filed and paid by 31 January and if you are late in filing, it means an automatic £100 will be added to whatever is owed. This year a record number of 1.1 million taxpayers missed the deadline, possibly because they were drawn into the tax regime for the first time, due to the effects of fiscal drag.

How does fiscal drag affect my tax bills?

Fiscal drag is an economic phenomenon happening currently, as frozen personal allowances combined with inflationary wage rises drag more people into paying tax. Other reasons why more people have had to file a self assessment tax return this January include higher savings interest rates and an unchanged savings personal allowance, plus more people having to pay the child benefit high income charge and report it through self-assessment. Finally, a new disclosure campaign targeting taxpayers who have capital gains tax liabilities from undeclared crypto asset gains is also having an impact on numbers.

What are the penalties for a late tax return?

When a self-assessment tax return is filed late, an initial £100 penalty is charged. The penalty applies even if there is no tax to pay or if the tax due is paid on time. After three months, an extra £10 a day, up to a maximum of £900 is added. After six months, a further penalty of 5% of the tax due or £300, whichever is greater applies. After 12 months, another 5% or £300 charge applies, whichever is greater.

In addition to the automatic late filing penalties, extra interest and penalties may be added to a tax bill for failing to pay on time. Based on current interest rates, 7.75% annual interest is charged on tax overdue, which is charged on a pro-rata basis until payment is made. Extra fines of 5% of the tax due after 30 days, six months and then 12 months of being outstanding are also applied.

How many people files late in 2024?

In spite of the thousands of late filers, a record number of people also filed on time this year. 11.5 million people had submitted a self-assessment return by midnight on 31 January, slightly higher than the previous year.

Interestingly some people really leave things to the last minute. Records from HMRC showed that 778,068 people filed their tax return on deadline day and 32,958 people submitted with just one hour to spare. They must have very reliable broadband.

HMRC is asking all taxpayers who have not filed their tax return or paid the outstanding tax yet to come forward and do so. They may allow you to negotiate payment by instalments and by being proactive, you could reduce the total amount of penalties that may be imposed on you.

If you would like help managing your personal tax, please contact us via partners@rjp.co.uk.