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26 Feb 2019

HMRC delays tax returns penalty notices: will you face extra fines?

Taxpayers who missed the deadline face mounting fines

More than 740,000 taxpayers will be fined at least £100 for missing the deadline to file their tax returns. But official notices won't be sent out until April, HM Revenue and Customs (HMRC) announced last week.

Tax returns for 2017-18 were due on 31 January 2019, as were any outstanding tax payments. The longer you wait to file and pay, the more you'll be penalised - for tax returns that are three months overdue, you could start paying up to £10 a day in fines, plus interest.

Which? looks at why penalty notices are delayed, how much taxpayers might have to pay and what happens if you don't pay your penalty.

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Why are penalty notices being delayed?

Last week, HMRC announced that no penalty notices would be sent out until April,blaming the prospect of a no-deal Brexit for the delay.

It said staff expect an 'increased demand' in its call centres when the UK leaves the EU on 29 March, so have pushed back sending out the notices to 'ensure the best service to our customers'.

If a taxpayer didn't realise they were meant to file a self-assessment return, they may only have a few weeks after receiving the penalty notice before the late filing fees jump up to £10 a day.

However, HMRC said people who receive the last penalty notice letters in April will be given 'several weeks' to respond.

It also said self-assessment taxpayers have been reminded regularly with 'nudge messages' before the deadline and that no-one will be 'unfairly penalised'.

  • Use the Which? online tax calculator:our easy-to-use and jargon-freetax calculator offers personalised tax tips, and you can submit the form directly to HMRC, even after the deadline.

What are late filing penalties?

Self-assessment tax returns can either be completed via paper before October 31 or online via the HMRC website by January 31. This means tax returns for 2017-2018 could be filed online up until midnight on January 31 2019.

Anyone who missed this cut-off - even by a minute - incurred an automatic fine of £100, but that's only the beginning. Afterthree months, the fines will grow by the day if the return still has not been completed.

We've outlined the kinds of charges you could face below.

Late payment penalties and interest

Apart from fines for filing late, you'll also face an additional penalty if you pay your outstanding bill more than 30 days after the deadline - and you're unlikely to know how much you owe until your return is filed.

If you pay after 2 March 2019, you could be charged a penalty equating to 5% of the tax you owe. And if you leave it six months, you'll be charged a further 5%, and then another 5% after 12 months.

In addition, you'll start accruing interest on late payments from the day your bill is overdue. The current late payment interest rate accordingis 3.25%, according to HMRC.

How much could you pay?

Self-assessment taxpayers who missed the online deadline should complete their return as soon as possible to avoid fines and interest charges building up.

Say, for example, you file your tax return on 5 May and pay your outstanding bill of £2,000 on the same day.

At this point, you'd face an additional penalty of £264, namely:

  • £100 - the automatic late filing penalty.
  • £50 - additional penalty for being more than 3 months late, charged at £10 a day.
  • £100 - 5% of your tax bill for paying more than 30 days late.
  • £14.01 - interest charges on late payment.

You can calculate your potential penalties using the gov.uk calculator.

What if I don't pay my penalty?

Once your penalty notice arrives, you'll be given instructions on how to pay your fine.

If you don't pay, HMRC may pass it on to debt collectors, and the matter could end up in the County Court or Sheriff Court.

In cases where you're not able to pay, you should contact HMRC straightaway by letter or email. HMRC says it will normally accept payment in monthly installments over a short period.

Can I waive the late penalties?

You may be able to waive the penalty for filing late if you have a reasonable excuse for not being able to meet the deadline.

HMRC defines this as 'normally something unexpected or outside your control', and you need to show that it prevented you from filing on time.

Each case will be considered on it's own merits, but examples of reasonable excuses include:

  • the recent death of a partner
  • an unexpected hospital stay
  • computer failures
  • service issues with the tax authority's online services
  • a fire which prevented you completing a tax return, or caused postal delays.

Should I wait to file my tax return?

If you haven't already filed your tax return, you should do so as soon as possible. If some figures haven't been confirmed, you're better off filing now, and then submitting a correction, to keep your fines at a minimum.

Similarly, it's worth paying your tax bill now. If for whatever reason you can't pay, contact HMRC to discuss your options.

The HMRC portal is still open, or you can file your tax return using an online tool - including the Which? tax calculator, which allows you to file direct to HMRC.

Do I need to submit a tax return?

If you're not sure whether you need to submit a tax return, our video below explains how self-assessment works and who pays.