Tax Return penalties get expensive

Life has just become a whole lot more expensive if you miss the deadline for filing your Tax Return. 

We are used to the Revenue charging a £100 penalty for a late return, but changes in the rules mean this can now climb as high as £1,600 or more. And the punitive penalties can affect you even if it turns out you have no tax to pay.

Nearly 10 million people in the UK must submit a self-assessment return each year. The self-employed, company directors, higher rate tax payers and those with multiple incomes have to submit an annual return.

Until now, the Revenue has always levied a £100 fine if the return is submitted late, but it generally wasn't charged if the tax was paid on time. Now, for the first time, late return penalties for the year ended 5 April 2011 will not now be cancelled, even if no tax is payable. But that is not the end of the changes, or the potential expense. 

Should the return still be outstanding three months after it is due then further automatic penalties of £10 per day will start being added, until another £900 is added. Then, once the return is six months late, the Revenue can then charge a further £300 or a penalty equal to 5% of the tax due, if it is more.

This means that by the time the return is six months late at least £1,300 of fines will have been incurred.

The deadline for filing the 2011 Tax Return electronically is 31 January 2012, but if this form is submitted on paper the deadline is shortened to 31 October 2011. Paper Returns will therefore be three months late on 1 February 2012, and will immediately start incurring the daily £10 charges.

The penalties do not end there, however, as a further £300 or up to 100% of the tax due can be charged by the Revenue once the return is 12 months late.  The total penalties will then be at least £1,600 and this will not be cancelled, even if no tax is payable. Furthermore, these charges do not replace the penalties for the late payment of Income Tax, which include up to three further fines of 5% of the tax due after 30 days, six months and 12 months, as well as the addition of daily late payment interest.

Alan Rolfe, tax manager for HWB, said: "It is today more important than ever before not to delay completing your tax return. These new charges are significant and designed to seriously penalise those that drag their feet. However, all of this extra expense need not be a concern if you let professional advisors handle the prompt submission of your Tax Return so ensuring the costly filing deadline is not missed." 

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