The number of people fined by HM Revenue & Customs for paying their self-assessment tax late has risen sharply, new figures have revealed.
Around 331,000 people were penalised for their tax being 30 days late in 2016-17, the latest full year available. This represented a 14 per cent increase on the 2015-16 year, when 291,000 people were issued with such fines.
The figures were also an increase on 2014-15 tax year when 283,000 people received a 30-day late payment penalty.
Tim Woodgates, associate and tax specialist at accountancy firm Moore Stephens, said: “The pool of people at risk of being fined for late payment is now bigger than ever as self-employment continues to grow.” Moore Stephens uncovered the uptick after a freedom of information request.
Individuals new to self-assessment could struggle to understand the various deadlines they must meet, Mr Woodgates added.
The number of self-employed individuals has been growing in recent years and reached a record high of 4.9m in March, according to the Office for National Statistics.
HMRC’s penalties vary depending on the error committed on completing a self-assessment tax return. Individuals who pay late receive a fine of 5 per cent of the tax unpaid at 30 days, six months and 12 months after the January 31 deadline.
Meanwhile, failure to notify HMRC of the need to complete self-assessment within 12 months can attract penalties of up to 30 per cent of the unpaid tax, assuming the omission was not deliberate.
Late filing of self-assessment tax returns attracts an initial £100 penalty, which applies even if there is no extra tax to pay or if the tax due is paid on time. After three months, there are additional daily penalties of £10 per day, up to a maximum of £900. After six months, there is a further penalty of 5 per cent of the tax due or £300, whichever is greater. After 12 months, another 5 per cent or £300 charge applies, whichever is greater.
“Depending on the situation you could end up getting stung for all three [types of penalties],” said Mr Woodgates.
Taxpayers could also be struggling to meet their obligations on time due to a tougher economic backdrop. Since January 2018, taxpayers have no longer been able to pay tax using a personal credit card.
“The fact that more and more taxpayers are struggling to keep on top of their tax payments could well be symptomatic of issues in the wider economy,” said Hugh Gunson, senior associate at law firm Charles Russell Speechlys. “Anyone facing a penalty of this nature should always consider whether they can challenge it, although the grounds are quite limited.”
HMRC will not charge penalties if an individual can prove they have a reasonable excuse, such as an unexpected stay in hospital or a close bereavement.
However, the freedom of information request revealed a fall in the number of fines for late payment at 30 days, which were subsequently cancelled by HMRC. In 2014-15, 50,000 fines were cancelled, declining to 47,000 in 2015-16 and 46,000 in 2016-17.
“This could suggest that HMRC is becoming less sympathetic to taxpayers who appeal against late payment penalties — even though many have genuine and legitimate reasons for paying late,” Mr Woodgates said.
HMRC said: “We don’t want to receive penalties, just the completed return. We understand that people will always have a reasonable excuse for missing the deadline and our criteria for accepting a reasonable excuse as grounds for cancelling the penalty have not narrowed.
“Inevitably the numbers of penalties issued and cancelled will fluctuate as we take on board specific circumstances year by year.”
