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Late filing by taxpayers gives Government a £95m boost – £25m more than last year

HM Revenue & Custom’s (HMRC) official records indicate that 958,000 missed the recent 31 January deadline for filing their Self Assessment tax returns.

Robert Salter said: “As these taxpayers are automatically liable to a £100 late filing penalty (even if they haven’t actually underpaid any tax), this failure provides the Government with another £25m in income compared to the previous year.”

Salter points out that the number of tax returns not submitted has risen by over 30% on a year-by-year basis from 2017/18 and 2018/19 and that this is a problem that HMRC need to urgently look at.

He added: “This increase in unfiled returns highlights that HMRC needs to improve its focus and systems for educating taxpayers in regards to their obligations, to ensure that the number of unfiled tax returns is minimised. Otherwise, cynics might start to believe that they are using the late filing penalties as an additional source of revenue.”

This failure provides the Government with another £25m in income compared to the previous year

Salter said that many people are still not aware that they will be fined for late filing and that both this and penalties for not making a payments can quickly result in huge bills being liable.

He added: “Fines and penalties can quickly add up. Those that did not file by 31 January get the automatic fixed penalty of £100.

“If the tax return is three months late, HMRC will start charging daily penalties of £10 per day and these run for a period of up to 90 days, so up to £900 in total.

“After 6 months, HMRC will charge a penalty of 5% of the person’s tax or £300 – whichever is higher. Therefore, within 6 months, someone could be facing total penalties of at least £1,300. The penalties start to become even more serious if the tax return is more than 12 months late and can be as much as 200% of the tax.”

Salter added: “HMRC will charge these penalties even if the person doesn’t actually have any tax to pay so it is imperative that people get their tax affairs up to date and make the returns in a timely fashion.

“People should have paid the tax that they owe for 2018/19 by the 31 January together with the 1st payment on account for the 2019/20 tax year, if that was relevant.

“If a person doesn’t pay their tax on time, HMRC will charge daily interest at 3.25%. Furthermore, if they don’t pay the tax by 1 March, HMRC will charge a penalty of 5% of the tax and further 5% penalties are levied if the tax is unpaid at 6 months and 12 months.”

Salter said: “If someone doesn’t file their tax return until 1 June and they calculate they have tax to pay of £1,000, they could be facing an additional bill of penalties and interest of just less than £500, which is nearly as half as much of the tax owed in the first place.”

For further information, please contact Robert Salter.