File your tax return on time and avoid the new penalties

People are being urged to fill in their 2010/11 Self Assessment Return on time and avoid the new penalties.

The new penalty regime for late filing and late payment of Income Tax through Self Assessment starts in April 2011.

Taxpayers who fill in Self Assessment tax returns will shortly receive their 2010/11 notices and paper returns.

These will include information on the new penalty framework and how it will significantly increase penalties for those who file and pay late. A tax return filed six months late could attract a penalty of at least £1,300.

HMRC’s Stephen Banyard said: “The vast majority of people don’t have to pay penalties because they send in their return and pay on time. But there are always a small number of people who have avoided filing or paying on time.

“HMRC spends a lot of time pursuing late returns and getting involved in unnecessary appeals work. We want to focus our resources on more productive work such as catching criminals and collecting tax.

“The old £100 penalty was not much of a deterrent and these new penalties, which increase over time, will get people to submit returns as soon as possible. Basically the greater the delay, the greater the penalty.”

The penalties for filing your tax return late are:

• Day one: you will be charged an initial penalty of £100, even if you have no tax to pay or you have already paid all the tax you owe 
• Three months late: you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900 
• Six months late: you will be charged further penalties, which are the greater of 5 per cent of tax due or £300 
• Twelve months late: you will be charged yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases you face a higher penalty of up to 100 per cent of the tax due. 

Penalties for paying your tax late are: 

• Thirty days late: you will be charged an initial penalty of 5 per cent of the tax unpaid at that date 
• Six months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
• Twelve months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid

These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until your payment is received.

Penalties will be automatically sent to all Self Assessment taxpayers who do not file and pay on time. Taxpayers will be able to appeal against any penalty on the grounds that they have a reasonable excuse for not complying on time. All penalty notices will include an appeal form and details on how to appeal.