In coming years, you’ll no longer face a £100 fine for filing your tax return late, as HM Revenue and Customs unveils a new points-based model that promises to be more lenient towards taxpayers.
In the 2017 Autumn Budget, Chancellor Philip Hammond announced HMRC would reform the penalty system for late submissions. The details of that system have now been revealed, demonstrating a softened approach towards late submissions.
Which? explains how late fees are set to change and what you’ll need to pay in 2016-2017.
- Need help filing your tax return? The easy-to-use, jargon-free Which? tax calculator allows you to work out your tax online
New points-based system for late fees
Under the model unveiled by the government this week, taxpayers who miss the filing deadline for tax returns would be scored on a ‘points-based system’ – similar to drivers’ licenses.
Every time you submit a return late, a point would be added to your record – and when you hit a specified number, you’ll face a penalty.
Thresholds will be determined by how often you’re required to submit information to HMRC.
If you need to submit more often, you’ll have more flexibility – but if you submit annually, like many individuals who qualify for self-assessment, you’ll only be able to accrue two points before facing a fine.
- Find out more: self-assessment tax returns – everything you need to know
How will late submission points work?
Each missed deadline with earn you a point. But after a set period of ‘good compliance’ – meaning you’ve submitted on time and otherwise followed the rules – your points will re-set to zero.
Points will also expire automatically after 24 months, though not for those who have already earned a penalty.
Under the proposal, the points will apply ‘per tax’ – meaning if you have to pay different types of tax, the points score for each type will be kept separately, not lumped together.
Crucially, the government will give HMRC discretion to not apply the points where a person has provided a reasonable excuse. You can also appeal both the points and the penalties if you feel it’s justified.
When will the points system be implemented?
The changes were first announced in the Autumn Budget 2017, and were immediately followed by a consultation, which has now ended.
As a next step, legislation will be drafted up and consulted upon – which is expected to happen by summer 2018.
In a paper released last week, the government indicated that the new system is likely to be first implemented for VAT payers from 2020.
How late fees will work in 2016-2017
If you have to file a self-assessment tax return, you have until 31 January to submit your paperwork online (or 30 December if you want your tax automatically withdrawn from your wages).
For the 2016-2017 tax year, the old penalty system will continue to apply – so make sure you get your returns in on time.
If your return arrives even a day after the deadline, you could face a £100 fine. This fine escalates depending on how delayed you are. In the most serious cases, you may be fined 100% of the tax payable – effectively doubling your bill.
In the 2015-2016 tax year, HRMC reported that 840,000 people missed the final deadline – and around 33,000 filed in the final hour.
- Find out more: Late tax returns and penalties – how much you’ll need to pay
Do I need to file a tax return?
Self-assessment tax returns have to be filed by almost 11 million people in the UK.
If you need to file, you can submit online with HMRC – or use the Which? tax calculator to guide you through the process.
In our video, we explain who needs to file and what the process is.