Counting The Cost of Filing a Late Tax Return

The Autumn is upon us and with the changing season, a change in Government policy will also take effect. For the 9 million self assessment taxpayers in the UK, the cost of filing late has just multiplied.

Designed to assist HMRC in cracking down on the 1 million or so tax payers who file their returns late each year, the new penalty scheme could see even those owing no tax incurring fines of over £1,300.

Until this recent change, anyone filing a late tax return would incur a £100 fine, increasing to £200 if you had still not filed 6 months later. However, the fine could not exceed the amount of tax owed. So if you owed no tax, you could not be fined for filing your return late.

The newly implemented penalty scheme will now see any late filers incurring an automatic £100 fine, even if there is no tax to pay, though the major change is the clock will start ticking on other penalties.

If you still haven’t filed 3 months after the deadline, a £10 penalty per day will accrue, up to a £900 maximum. Six months after the deadline, a penalty of 5% of the tax owed or £300, which ever is greatest, will be added. After 12 months, another 5% or £300 penalty is applied, plus interest added on the total fine of 3%.

If you do owe tax, the 3% interest is levied on that amount, in addition.

“the cost of filing late has just multiplied.”

As an example, a tax payer owing no tax in the tax year ending 5th April 2011, but who fails to file their return on time, will incur a penalty of £1,300 after a 6 month delay and just over £1,600 after 1 year.

At Amstone Management Limited, a small accountancy practice on the Gloucestershire/Worcestershire border, we work to ensure that none of our clients fall into the 1 in 9 that file their returns late. By offering a professional, cost effective service, we will aim to reduce your tax bill by more than the modest fee we charge for our service and guarantee to ensure that you stay away from the hefty new HMRC penalties.

Do you need to fill in a tax return?

It depends on your circumstances and tax affairs. Those who will always have to fill in a return include; self employed, company directors, trustees, £100,000 or more income earners and those with foreign income.

There are many other reasons, with more complicated tax affairs and incomes, why you may have to file a tax return. Further guidance is available direct from the HMRC website; or call us at Amstone Management Limited; 01684 299536 and we will advise you, completely free of charge.

Key Tax Dates and Deadlines

October 5th        You must register with HMRC if you think you need to file a return for the 2010/11 tax year

October 31st      Paper returns must be with HMRC by midnight

January 31st     Deadline for online returns and to pay any tax owed