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Advisers have warned people who are late filing a UK tax return to correct this as soon as possible or risk higher penalties that came into force this month.
More than 1.1mn people missed the January 31 deadline to submit their 2022-23 self-assessment tax return, a 10 per cent increase on last year.
Overall, a record number of people filed returns as more individuals were forced to complete self-assessment due to a multiyear freeze in tax thresholds.
Anyone who failed to file their return on time has already been hit with an immediate £100 fine from HM Revenue & Customs. But after three months, the penalties for continued late submission of the return become more severe — £10 per day, up to a maximum of £900. HMRC still charges these penalties when there is no tax due on the late return.
“On May 1, the penalty regime for late filing steps up a gear and can really take people by surprise,” said Dawn Register, head of tax dispute resolution at accountancy firm BDO.
Some people were in “blissful ignorance” of their need to submit a tax return and may not realise it was already late, she added.
For instance, someone with bank accounts abroad who had received small amounts of interest might wrongly think they do not need to report this to HMRC, Register said. In many cases, these people might not have any additional UK tax to pay but could still clock up penalties for not filing a tax return on time.
Individuals who sold rental properties during the 2022-23 tax year might also be caught out by the requirement to submit a self-assessment tax return, she warned. This is because anyone selling rental property is required to tell HMRC and pay any capital gains tax within 60 days of the property sale.
As a result, these people might think they have already made the disclosure and not realise they also need to report any relevant transactions on a self-assessment tax return, even if they have no additional tax to pay.
In addition to late filing penalties, there are also fines for late payment — if an individual has tax to pay.
This consists of 7.75 per cent annual interest on the tax due, charged on a pro-rata basis until payment is made, and additional fines of 5 per cent of the tax due after 30 days, six months and 12 months. HMRC’s late payment interest is currently at a 16-year high.
Michelle Denny-West, partner at Moore Kingston Smith, another accountancy firm, said the late filing and payment penalties were “quite an aggressive part of the tax regime”. She urged anyone who had yet to submit a late tax return to do so as soon as possible.
“Sometimes people bury their head in the sand, which is the worst thing you can do,” she said.
It was important to get a tax return filed, even one that used estimated numbers, if necessary, as these could always be corrected later.
“That way, you can at least stop those penalties,” she added.
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