Self Assessment (SA) tax penalties: what penalties are due for outstanding tax returns? What penalties are due for late payment?

Tax penalties apply for the late filing of SA tax returns and late payment of tax due under SA. There may also be penalties for failure to notify chargeability and for error, if there is a mistake in a retrun.

The late filing penalty system changed for returns and payments from the 2010/11 year onwards.

Late filing: a key feature of the current regime is that the late filing penalty is not reduced if tax is paid on time, see Late filing a SA return: automatic penalties

Penalties for:

are all tax geared: if no tax is due or outstanding, no penalty applies.

Interest is charged on both unpaid tax and unpaid penalties.

Late filing and payment: at a glance

Late filing

Late payment

Penalty

Miss filing deadline

 

£100

 

30 days late

5% of tax due

3 months late

 

Daily penalty £10 per day for up to 90 days (max £900)

6 months late

 

5% of tax due or £300, if greater*

 

6 months late

5% of tax outstanding at that date

12 months late

 

5% or £300 if greater*, unless the

taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due.

 

12 months late

5% of tax outstanding at that date

12 months & taxpayer deliberately withholds information

 

Based on behaviour:

  • deliberate and concealed withholding 100% of tax due, or £300 if greater.
  • deliberate but not concealed 70% of tax due, or £300 if greater.

Reductions apply for prompted and unprompted disclosures and telling, giving and helping.

* Subject to multi penalty rule para 17.

Late filing example:

John goes to Australia on a sabbatical and accidentally forgets to file his 2015/16 self assessment tax return, he has a tax liability of £100.  He files his return on 1 February 2018. HMRC sends him notification of penalties as follows:

Trigger date Penalty
Missed filing deadline: 31 Jan 2017 £100
Unfiled after 3 months: deadline 30 April 2017 £10 per day for 90 days
Unfiled after 6 months: deadline 31 July 2017 £300* reduced to £100
Unfiled after 12 months: deadline 31 Jan 2018 £300* reduced to £nil

 

*The penalties for being 6 months late and 12 months late are subject to the interaction rule in para 17(3) and taken together they should not exceed 100% the tax due. See Penalties, Grounds for Appeal, HMRC error

Late payment example:

Jane is due to make a balancing payment of £10,000 in income tax under Self Assessment for the 2016/17 tax year; it was payable on 31 January 2018.
If the tax was not paid penalties accrue as follows:

Trigger date Penalty
Unpaid by midnight 2 March 2018 £500 (5%)
Unpaid by midnight 1 August 2018 £500 (5%)
Unpaid by midnight 1 February 2019 £500 (5%)

 

Late payment: Time to pay agreements

If the taxpayer makes a time to pay agreement with HMRC the penalty is suspended.

  • The taxpayer will become liable to the penalty if the suspension agreement is broken.

Special reduction

  • HMRC has a statutory requirement to consider whether any special circumstances exist and if so it may override the statutory penalties and reduce them as it sees fit. 

Appeal

  • The taxpayer has 30 days to lodge an appeal with HMRC against a tax penalty.
  • A late appeal may be accepted at the discretion of HMRC or the tribunal judge.

The legislation relevant to each type of penalty provides for the appeal process and it is advisable first off to ensure that any penalty charged has been made correctly according to the legislation.

HMRC will not challenge any late filing penalty appeal provided that there is a reasonable excuse for late filing and that an appeal has been made.

Appealing a penalty can be far from straightforward as there are numerous grounds for appeal and technical arguments that can assist the taxpayer.

Daily penalties: developments

See Appealing Daily Tax Penalties.

See: How to appeal a tax penalty for detailed guidance and hint and tips.

Small print

The legislation is found in Schedules 24 FA 2007, Schedule 41 FA 2008 and Schedules 55 and 56 FA 2009