Consequences of Late Tax Returns and Filing Mistakes

Failure to submit your self-assessment tax returns in due time carries quite heavy consequences: the HMRC charges an automatic £100 fine, even for one day's delay beyond the deadline. With the paper forms due on 31 October 2024 and online returns by midnight on 31 January 2025, there is just no room for error here.

What Happens When You Are Late?

For the 2020/21 tax year, HMRC applied some leniency in not charging late filing penalties until 28 February 2022. A penalty would follow as normal if this extended deadline was missed. It is not anticipated that such leniency will occur in the future, and fines for late returns continue to rise with each day the return is late.

You will have to pay a penalty of £100 if your return is one day late. After three months, this increases to £10 per day, up to 90 days, which could be £1,000. At six months, the penalty then increases to £300 or 5% of the tax due, whichever is the greater. A year of delay adds another £300 or another 5% charge, in addition to the accumulating penalties. For partnership tax returns, each and every one of the partners might well be liable for such penalties if the return is submitted late.

What If You Miss Filing Your Tax Returns?

Missing the deadline to file your tax returns is one thing, but there are further consequences if you miss the deadline to pay your tax bill. The payment deadline is 31 January following the end of the tax year unless you are using the PAYE system. Failing to meet this deadline means that interest charges mount daily, currently at a rate of 7.75% per year.

On top of the penalties, interest is charged. If payment is not made within 30 days, the IRS adds a penalty equal to 5% of the tax due. At the six-month mark, you are dinged with another 5% penalty, and at 12 months, you add another 5%. These are in addition to any filing charges for late filing of your return, greatly adding to the financial cost of the late filer.

For the 2020/21 tax year, HMRC did not charge the first 5% late-payment penalty that normally would have been due on 3 March 2022, allowing taxpayers until 1 April to pay their balances or make a Time to Pay arrangement. However, from 1 April, late-payment interest is charged on the amount if still outstanding, though late-payment interest generally had accrued from 1 February.

Penalties for Errors on Your Tax Returns

Mistakes in your tax return can also trigger penalties, depending on the severity. If HMRC believe the mistake was because of carelessness, then the penalties are from 0% to 30% of the extra tax payable. Deliberate underreporting leads to harsher fines of 20% to 70%, while if there's evidence of concealment, the penalty goes up to between 30% and 100% of the underpaid tax.

If you notice an error on your return after you have submitted it, you may file an amendment within a year of the deadline using HMRC's online services or via your software provider. If a paper return was submitted, an amended return needs to be submitted to HMRC with "Amended" highlighted on any pages where changes have been made.

Reasonable Excuses for Filing Late

HMRC does allow for some "reasonable excuses" when taxpayers fail to meet deadlines. Generally speaking, these will be situations that are considered to be outside the control of the individual and can include things like recent bereavement from a partner, hospitalisation unexpectedly, or system failures from the technology. In cases where this is considered valid by HMRC, penalty for lateness may be waived. However, it is always advisable that one files their returns as early as possible to avoid any complexities arising during this process.

What To Do If Your Paper Return Will Be Late

If you think that your paper tax return is not going to be filed by 31 October, then sending in a late paper return would not be a good idea. You should instead file your return online where the deadline is 31 January. If you send in a paper return late and then an online return on time, you will still receive a penalty as HMRC will count the first return it receives.

It means that, with the imposition of financial and legal consequences for late filing or returns filled out incorrectly, it calls upon the taxpayer to keep up with their deadlines and have all the paperwork done correctly to avoid these unnecessary penalties.

Conclusion

If you find the process difficult or have questions, you can also seek help from the UKPA and our expert team or access our online resources including blogs and eBooks. You can also visit our YouTube channel.