Self Assessment Tax Return Penalties

It happens. People don’t file their tax returns on time. Some do it knowingly others have an unavoidable problem that prevents them from meeting the tax deadline.

Unfortunately, HMRC isn’t particularly lenient, even in the most emotional of cases, and have an automatic penalty system in place to punish offenders.

In this guide, I’ll walk you through the self-assessment tax return penalties system and share guidance on what HMRC deems a reasonable excuse for missing the tax deadline.

What Happens if I Don’t File my Self-Assessment?

If you haven’t filed your tax return, then my best advice to you is to make a plan for when you will.

Whatever your reason, HMRC will still want it. There’s no getting out and penalties will keep building up until you do it.

If you miss the 31 January filing deadline, you’ll face penalties for:

  1. “Late Filing Penalties” for mot putting your tax return in;
  2. “Late Payment Penalties” for note paying your tax (as well as interest).

Penalties and interest are calculated according to the number of days late, and are added up cumulatively by HMRC until you file your return and pay what you owe.

Late Filing Penalties

 Penalty
Missing the 31 January deadline£100
3 months late£10 daily penalty per day up to a maximum of £900
6 months late5% of tax due up to £300
12 months late5% of tax due up to £300

Late Payment Penalties

 Penalty
30 days late5% of tax due
6 months late5% of tax due

Once unpaid tax or outstanding tax returns go over 12 months, HMRC get more serious cases and can demand that the taxpayer 100% penalties of the tax due.

The approach they take will be based on their suspicions about the tax payer or whether they think there is a genuine case for failing to file returns and pay their tax.

Example

It is the 1 February 2020 and a tax payer has not filed their return for 2018/2019. They owe £5,000 of tax.

Here’s how the penalties will add up over the next 12 months.

On 1st February 2020 – Automatic filing penalty of £100

On 30 April 2016 (3 months late) – Late filing penalty of £10 per day (£900) and unpaid tax penalty of £250

On 31 July 2016 (6 months late) – Filing penalty of £300 and unpaid tax penalty of £250

On 31 January 2017 (12 months late) – Filing penalty of £300 and unpaid tax penalty of £250

The total penalties are £2,350 plus interest, currently estimated at £135.

It is worth noting, that if the missing return and tax payment were both submitted just one day earlier on 31 January, this would have avoided the month 12 late penalty being imposed, saving £550.

How to Estimate Your Penalty for Late Self Assessment Tax Returns and Payments

The easiest way to estimate how much penalties you owe is to use the HMRC online calculator.

HMRC Online Penalty Calculator

Reasonable Excuses for Missing the Tax Return Deadline

Y may be able to avoid paying fines and interest if you have a “Reasonable Excuse” for missing the deadline.

As usual, HMRC is very prescriptive with what it defines as reasonable and not reasonable.

What HMRC considers “Reasonable Excuses”

  • your partner or close relative died shortly before the tax return or payment deadline;
  • you had an unexpected stay in hospital;
  • you had a serious or life-threatening illness;
  • your computer or software failed just before or while you were preparing your online return;
  • service issues with HMRC online services;
  • a fire, flood or theft prevented you from completing your tax return;
  • postal delays that you couldn’t have predicted;
  • delays related to a disability you have.

Here’s what won’t get you off the hook

  • you relied on someone else to send your return and they didn’t (that includes an accountant);
  • your cheque bounced or payment failed because you didn’t have enough money;
  • you found the HMRC online system too difficult to use;
  • you didn’t get a reminder from HMRC;
  • you made a mistake on your tax return.

How to Appeal a Self Assessment Penalty

If you have a reasonable excuse you’ll need to make an appeal to HMRC.

You can do this on the HMRC website or by calling them on 0300 200 3310.

Deadline to Submit Your Appeal

You must appeal within 30 days of the date of the penalty notice.

If you miss this deadline you must explain the reason for the delay so that HMRC can decide if they’ll consider your appeal.

Can You Go to Jail for Not Paying Taxes in the UK ?

In the most serious of cases of tax evasion, HMRC do have the right to send someone to prison for up to seven years and impose unlimited fines.

Wrapping Up

HMRC gives us 9 months to file our tax returns after the end of the tax year, which they consider is sufficient time for us to file and pay out tax, although it understands that there are exceptions.

The penalties for not getting your tax return in on time are pretty steep. So always try to do this even if you cannot pay your tax bill.

If you are using my bookkeeping spreadsheet then stay on top of your bookkeeping because it will give you all the numbers you need to start filing out your tax return in one tab. That means you can get your return filed sooner rather than later.

If you are struggling to pay your tax bill, HMRC may agree to accept instalments and penalties will be suspended by offering you a payment plan.  

If a payment plan is agreed then you must stick to it. Missing a payment can void your arrangement and you could be liable to pay the full amount immediately.

New Here? These are my most popular resources:

  • The Ultimate Bookkeeping Spreadsheet – Organise your money, track the numbers that matter and stay on top of your cash;
  • Freebies – templates, spreadsheets, calculators and cheat sheets. Here you’ll find all my freebies for the self-employed community, all in one place.
  • Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
  • FREE Business Expenses Cheatsheet – Check what you can and can’t claim as an expense against your taxes.
  • 6 Core Elements of Self-Employment Taxes – Confused by taxes? Worried you’re missing something when it comes to tax allowances and reliefs? These easy to follow 6 mini-guides will have you on top of the tax side of things in no time at all.
Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.