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Penalties for Late Filing and Mistakes in the Tax Return

Published by Shailesh Sapkota
Published Date: May 13, 2024

Tax filing and payment time can be a stressful period for everyone. One big worry is making mistakes or filing taxes late, which can lead to interest and penalties. These penalties are like punishments for not doing things right. It is important for people to understand these penalties so they can do their taxes correctly and on time.

In this article, we will delve into the various penalties that can arise from late filing and inaccuracies in tax returns, shedding light on the importance of adherence to deadlines and meticulous attention to detail in meeting tax obligations.

Self-Assessment Tax Return

Self-Assessment is a system used by HM Revenue and Customs (HMRC) to collect tax that is not deducted through the PAYE System.

Only income from your wages and pensions is deducted through PAYE. However, if you receive income from other sources – like self-employment, capital gains or dividends – you will need to report this to HMRC by filing a Self-Assessment Tax Return (SA100) Online or in Paper Form.

Deadlines

Deadline for payment of tax due

HMRC must receive your tax return and any money you owe by the deadline. For the Tax Year 2023/24, the deadlines for the return are as follows:

Deadline to Inform HMRC

If you need to complete a tax return and have not sent one before in any of the previous tax years, you must notify HMRC by 5 October following the end of the tax year. You can notify HMRC by registering for self-assessment. For the Tax Year 2023/24, the deadline is coming 5 October 2024.

Filing Return

  • Paper Return – If you are filing a paper return, you must complete and file the return by midnight 31 October following the end of the tax year. For the year 2023/24, the deadline is 31 October 2024.
  • Online Return – If you are filing an online return, you must do it by midnight 31 January following the end of the tax year. For the year 2023/24, the deadline is 31 January 2025.

Deadline for Payment of Tax Due

The tax payment for each tax year must be made by 31 January following the end of the tax year to which it relates. For certain taxpayers, interim Payments on Account (POA) with respect to Income Tax and Class 4 NIC may be required, which must be done by:

  • 1st Payment - 31 January in the tax year and
  • 2nd Payment - 31 July following the tax year.

Deadlines for the Tax Year 2023/24 are:

  • Tax Due – 31 January 2025
  • First POA – 31 January 2024
  • Second POA – 31 July 2024

Penalties for Late Filing

You will be penalised if you miss the filing deadline, i.e., 31 January or 31 October.

If you file the return a day late, you will be charged a fixed penalty of £100.

If you file your return three months after the deadline, you will start getting charged £10 each additional day (up to 90 days), in addition to the £100.

If you file the return more than six months late, you will have to pay penalties worth £300 or 5% of tax due, whichever is higher, in addition to the above penalties.

If you file the return more than 12 months late, you will have to pay penalties worth the higher of £300 or 5% of tax due in addition to the above penalties.

The table below explains the time frame and the corresponding penalties mentioned above:

Date Return is Filed

Penalty Imposed

After due date - up to 3 months late

Fixed penalty of £100

3 months to 6 months late

Penalty of £10 per day (up to 90 days) in addition to £100.

6 months to 12 months late

Higher of:
   -5% of tax due
   -£300
(In addition to above penalties)

More than 12 months late

Higher of:
   -5% of tax due
   -£300
(In addition to above penalties) 

Penalties for Incorrect Return

HMRC may charge you a penalty if you send the inaccurate return or document and the inaccuracy:

  • results in tax being, understated or overclaimed and,
  • was careless, deliberate, or deliberate and concealed.

However, if you have taken reasonable care to get things right, HMRC will not charge you any penalty. More details on reasonable care are discussed later in this article.

Penalties for incorrect return

HMRC has standardised penalties across taxes for different offences. One of the offences in which a standard penalty applies is filing an incorrect return. The standard penalties are applied based on HMRC’s view of the taxpayer’s behaviour and the error’s disclosure status.

HMRC’s View on Taxpayer’s Behaviour

HMRC determines the chargeability and penalty amount based on the taxpayer’s behaviour. HMRC has identified four different types of behaviour, which include:

Reasonable Care

This is where taxpayers take action to get things right. Reasonable care includes keeping sufficient records to make accurate tax returns safely, or asking HMRC or a tax adviser if taxpayers are unsure of anything and following the advice given.

Careless

This is where taxpayers fail to take reasonable care to get things right.

Deliberate

This is where the taxpayer knows the return has some inaccuracies, and despite the inaccuracies, the taxpayer sends it to HMRC. The inaccuracies can include understating the income, etc.

Deliberate and Concealment

This is where taxpayers know the return was inaccurate, and they take additional active steps to cover or hide those inaccuracies.

Disclosure Status

HMRC also determines the chargeability and penalty amount based on the quality of disclosure status. They have identified two types of disclosure:

Unprompted Disclosures

If the taxpayer discloses the inaccuracy to HMRC before HMRC discovers it, this is called an unprompted disclosure.

Prompted Disclosures

If the taxpayer discloses the inaccuracy to HMRC at any other time, this is called prompted disclosure.

Penalties

The penalty for the submission of an incorrect return is a percentage of the potential lost revenue (PLR). The potential lost revenue (PLR) is the additional tax from putting right the careless or deliberate inaccuracies, considering any overstatements that reduce the tax effect of the inaccuracies. You can get further guidance on PLR in HMRC Internal Manuals.

The standardised penalty percentage charge applicable to incorrect return filing with the HMRC’s view of taxpayer’s behaviour and disclosure status:

Type of Behaviour

Unprompted Disclosure

Prompted Disclosure

Reasonable care

No penalty

No penalty

Careless

0% to 30%

15% to 30%

Deliberate

20% to 70%

35% to 70%

Deliberate and concealed

30% to 100%

50% to 100%

Appeal against Penalties

HMRC provides guidance on the process of appealing against self-assessment penalties for late filing or delayed payment in individual or partnership tax returns.

For more guidance, refer to our article on "Self-Assessment Penalties: When and How to Appeal".

Conclusion

In conclusion, understanding the penalties for late filing and mistakes in tax returns is paramount for taxpayers. Timely compliance with filing deadlines and meticulous attention to detail are crucial to avoid financial penalties and potential implications from HMRC.

By adhering to HMRC guidelines and taking reasonable care in tax affairs, individuals can navigate the tax landscape with confidence and integrity, ensuring compliance and minimising the risk of penalties.

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Shailesh Sapkota
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