We will endeavour to write this article as simple as possible for our readers, and consistent with the UK legislation regarding the penalties for non-payment or late payments to HMRC.

First of all, we must start from the premise that the government can charge you a penalty for various different reasons if you do not comply with the tax rules system. Penalties are usually sanctions designed to encourage conformability with the tax rules system, and this is a real cost for you.

But you will not be charged additional penalties if you have entered and stick to a method of splitting your installment tax payments over a longer period of time that is accessible to your payment method, meaning a Time to Pay arrangement with HMRC, in case of the following situations:

  • If you pay tax late.
  • If you submit a tax return or paperwork late.
  • If you fail to declare the changes that can affect your tax liability.
  • If you commit an error on your tax return, payment, or other documents that may change your tax liability unless you have reasonably taken care of it.

You must know that if you receive a Tax Return, you are legally obliged to complete it, even if you think it is not relevant to you. You will be charged a penalty, even if you do not owe any tax.

 Late payment penalties for income tax

Are calculated depending, obviously, on the period in which you delay your payment. For example:

  • If the after payment is 30 days late 👉 the penalties will represent 5% of tax outstanding
  • For 5 months after the above charge (meaning 6 months late) 👉 additional 5% of outstanding tax
  • For 6 months after the above charge (meaning 12 months late) 👉 additional 5% of outstanding tax


Late submission penalties

One of the most common mistakes made by taxpayers is related to the confusion that there is no obligation to file a tax return if you do not have tax liabilities. However, this attracts standard penalties for sending late tax returns. These are the following:

  • If the form is late, you will immediately be charged £100;
  • If the return is 3 months late for a maximum of 90 days, there is a £10 penalty per day;
  • If the form is 6 months late you will be charged with £300 or 5% of the tax due;
  • If the form is 12 months late, you will have to pay an additional £300 or 5% of the tax.

Remember, penalties are based on the total amount owed (as taxes) and are paid in addition to the tax due. If you took care to fill in the declaration correctly, then you have no reason to worry because you will not have any penalty to pay.

HMRC has developed a system of penalties for mistakes in tax returns based on the cause that led to the errors in the return. This system, percentual differs if it is simple negligence or mistakes have been intentionally completed to mislead the tax system:

  • If you have been careless, the penalty will be between 0% and 30% of the extra tax owing.
  • If you have deliberately underestimated your tax, the penalty is between 20% and 70%.
  • If you have deliberately underestimated your tax and attempted to conceal the fact, the penalty will be between 30% and 100%.

Of course, there is a way to minimize penalties, and the percentage of potential income lost depends in part on the type of behavior, as we said above (careless, deliberate, deliberate, and hidden). This means that the penalty can be reduced if you tell HMRC about the error, help HMRC determine how much extra tax is due, or give them access to information to verify your figures.


Yes, you can appeal against a penalty

Usually, you must meet the deadline within 30 days from the date of issuing the penalty notice in order to appeal it. You can simply contact us, and we will help you appeal against the £100 charged for the late submission of your tax return.


There is a tool on GOV.UK which estimates your penalty for late payments under Self-Assessment. – https://www.gov.uk/estimate-self-assessment-penalties

If you’re still confused about your tax return or if you’re having difficulties filling in your return, please contact us HERE.


👉 Interested in the IR35 rules? Read more:

>> What are IR35 (and Off-Payroll) rules?

>> Confusing IR35 regarding correct Off-Payroll tax treatment

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