It’s never a good idea to submit a late tax return. When you do, your tax bill starts growing, thanks to penalties and interest charges. These can quickly spiral, making it harder and harder for you to settle what you owe.
Because of the COVID-19 pandemic, HMRC cut taxpayers some extra slack this year. Although the income tax filing deadline remained at 31st January, we were allowed to submit our returns by 28th February without attracting a penalty. If you did this, you also have until 1st April to pay your tax (or organise a Time to Pay arrangement) without incurring another penalty. However, you still have to pay interest on what you owe from 1st January.
1.3 million late tax returns
Despite being given extra time to submit our income tax returns, 1.3 million people still hadn’t filed theirs by 28th February. If you are one of them, you now have to pay a £100 fine. Unfortunately, this is something you cannot avoid.
However, if you still haven’t submitted your tax return, it’s crucial that you do so as soon as possible. Once your return is 3 months late, you’ll start being charged £10 per day for up to 90 days. If you submit your return 6 months late, you’ll be hit with either a penalty of £300 or 5% of the tax due (whichever is higher). Get to 12 months and you’ll be forced to cough up another £300 or 5% of the tax due.
Late payment penalties
It’s not only late filing that attracts penalties, but late payment does too. Currently the taxman is giving us until 1st April to settle our bills without attracting a late payment penalty. However, as soon as payment is 30 days late you will get charged 5% of the outstanding tax. A further 5% is added at six months, and yet another 5% at 12 months.
Then there’s the interest you have to cover if you pay late. Recently, HMRC pushed the interest up to 3% from 2.75%.
Solving your late tax return problem
If you haven’t yet submitted your tax return, ask us to help. We can submit your Self-Assessment Tax Return quickly, helping you to avoid further penalties.
Once your return is in, it’s best to settle your bill immediately if this is possible. If it isn’t, the next best plan is to pay up before 1st April to avoid late payment penalties.
If you can’t settle in full, it’s a good idea to pay what you can and then to set up a Time to Pay arrangement. This allows you to spread the cost of your tax bill with monthly payments. The deadline for organising a Time to Pay plan online is 1st April, so you need to act quickly.
If you haven’t yet submitted your tax return or paid the tax you owe, you need to act quickly. As of this moment, you’ll have to pay a £100 late filing penalty, plus interest on what you owe from 1st February. Leave things until after 1st April and you’ll start being hit by hefty fines. Remember: 5% of a £15,000 tax bill is £750!
To stop your bills escalating, ask us to submit your return. That’ll prevent further late submission penalties. Then be sure to pay your tax or set up a Time to Pay arrangement by 1st April.
Of course, if you have any questions, please do get in touch. One of our accountants would be delighted to help you.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.