Self Assessment is a system started by HMRC that helps individuals determine how much tax they need to pay. Filing a late tax return can lead to problems, and it happens often. HMRC will follow up if you miss a deadline. The penalties for not filing your return or paying your tax can be severe, so staying on top of things is essential. If you find yourself facing an HMRC tax investigation, don’t panic. This guide will explain what to do if you missed the deadline and why you should submit your tax return as soon as possible.
What is the deadline for Self Assessment?
The deadlines for Self Assessment submissions for the 2023-24 financial year vary based on the format of your return:
- Paper return submission: The deadline is midnight on October 31, 2024.
- Online return submission: The deadline is midnight on January 31, 2025.
What happens if you miss the Self Assessment deadline?
If you miss the January 31 deadline for filing your Self Assessment tax return, there’s no need to panic. HMRC reports that around 1.1 million taxpayers have failed to submit their returns on time in recent years. Here’s what you can expect if you file late:
- Immediate penalty: A £100 penalty is applied automatically, even if you have already paid your tax or do not owe any tax.
- If you are 3 months late: The £100 penalty remains, plus daily penalties of £10 per day, which can total up to £900.
- If you are over 6 months late: An additional penalty of £300 or 5% of the tax due (whichever is higher) will apply.
- If you are over 12 months late: A further penalty of £300 or 5% of the tax due (whichever is higher) is imposed.
- For unpaid tax: Interest begins to accrue from the due date, and further late payment penalties of 5% will be charged 30 days, 6 months, and 12 months after the due date.
In summary, delaying your submission can lead to increasing costs, as HMRC enforces strict penalties for late filings
Interest charges on late Self Assessment tax payments
If you have missed the payment deadline for your Self Assessment tax bill, be aware that you will incur interest on any outstanding balance in addition to the filing penalties.
Interest rates on late payments
The interest rate for late payments is currently set at 2.75%, which is charged daily from February 1 until your balance is paid in full. For instance, if you owe £1,000 in tax and delay payment for a year, the interest alone would amount to over £27, in addition to any filing penalties.
Calculating interest on overdue tax
Calculating the precise interest due can be complex, particularly if you are making sporadic payments. HMRC provides an online calculator to assist with this, but settling any outstanding balance and addressing penalties as quickly as possible is advisable to limit interest charges. Remember that interest applies to the total outstanding tax amount, including any incurred penalties or surcharges. Therefore, waiting to pay could ultimately increase your total liability.
Understanding mistakes and penalties in tax returns
When it comes to submitting tax returns, mistakes can lead to penalties imposed by HMRC. The severity of the penalties depends on the nature of the error and the amount of tax owed. Errors can be categorised based on intent, ranging from simple carelessness to deliberate concealment.
Penalty structure:
- 0% charge: Applicable when you’ve exercised ‘reasonable care’ in completing your tax return.
- 0-30% charge: Imposed for careless mistakes.
- 20-70% charge: Applied when there is a deliberate underestimate of tax obligations.
- 30-100% charge: Reserved for cases where there is a deliberate understatement of tax along with attempts to conceal that under-reporting.
Fortunately, taxpayers can correct a tax return within 12 months after the Self Assessment deadline. It is important to prioritise submitting your Self Assessment form to HMRC as soon as possible, even if minor errors exist.
Appealing penalties for missing Self Assessment deadlines
HMRC provides a framework for appealing penalties if there is a reasonable excuse for missing the Self Assessment deadline.
What counts as a reasonable excuse?
According to HMRC, a ‘reasonable excuse’ is when an unexpected event outside your control stops you from filing your tax return on time. Here are some examples HMRC considers as reasonable excuses:
- A failure in the HMRC computer system prevents you from filing.
- Your computer breaks down right before or during the preparation of your online return.
- You have a severe illness, disability, or mental health condition that makes it hard for you to file your tax return.
- You registered for HMRC Online Services but didn’t receive your Activation Code in time to submit your tax return by the deadline.
HMRC is unlikely to be lenient if they think you are at fault for missing the deadline. To increase your chances, show proof of your situation and explain what steps you took to solve the problems. HMRC will examine each case and decide if it is a reasonable excuse.
Steps to appeal a penalty
- State your reason: Clearly explain why you missed the deadline for Self Assessment.
- Provide evidence: Support your argument with relevant documentation.
- Submit your appeal:
- Online: Log into your HMRC account and select the option to appeal a penalty, then follow the instructions provided.
- In writing: Draft a letter outlining your appeal and send it to the address listed on your penalty notice. Typically, you have 30 days from the date the penalty was imposed to submit your appeal.
How 3E’S Accountants can assist?
At 3E’S, our expertise in tax regulations can assist you in several key areas:
- Accurate filing: We ensure that your tax returns are accurately completed following all relevant laws and regulations.
- Strong appeals: We can help prepare a robust appeal against any penalties incurred.
- Negotiation: If you’re unable to pay the full amount owed, our accountants can assist in negotiations with HMRC, including arrangements for instalment payments.
- Deadline management: Our accountants can help you stay on top of deadlines to minimise the risk of penalties and overpayment.
In summary, we can ease the burden of managing tax responsibilities and help navigate the complexities associated with penalties and appeals.
