Don't Miss the Tax Deadline: HMRC Late Payment Rates Hit 16-Year High
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As the deadline for filing tax returns approaches, HM Revenue & Customs (HMRC) is poised to benefit from late payment interest rates reaching their highest level in 16 years. Taxpayers who fail to submit their self-assessment returns by January 31 may face penalties, with HMRC’s late payment interest currently set at 7.75%, the highest since January 2008.
According to experts, the government could see a significant increase in penalties this year, especially as over 3.8 million people are yet to file their tax returns, and more than 12.1 million tax returns are expected for the 2022-23 tax year.
New Filers Face Risks:
Dawn Register, Head of Tax Dispute Resolution at BDO, warns that many individuals may be unaware of their obligations, especially those newly drawn into the self-assessment tax net. These could include parents affected by the high income child benefit charge, higher earners, pensioners with increased savings, or individuals with side hustle earnings exceeding £1,000.
Penalties and Charges Overview:
Late filing incurs an initial £100 penalty, with additional daily penalties and percentage-based charges for longer delays. Stefanie Tremain, a tax partner at Blick Rothenberg, emphasizes the importance of filing on time to avoid the 7.75% late payment interest, which can quickly become a significant additional cost.
Mitigating Financial Impact:
To mitigate financial challenges, Lucy Woodward, a partner at Saffery, suggests setting up a “time to pay” arrangement with HMRC, especially for those unable to pay their tax debt by January 31. This arrangement may reduce penalties, though interest will still apply.
HMRC’s Assistance and Consideration:
HMRC encourages taxpayers to take action, submit returns, and use online resources to check owed amounts and pay online or through the HMRC app. It also acknowledges considering reasonable excuses for missing the deadline, potentially avoiding penalties for those with valid reasons.
Time to Pay Arrangements on the Rise:
In light of these challenges, HMRC reports that 44,800 self-assessment filers have set up “time to pay” arrangements since April 2023. In total, almost 900,000 HMRC customers are using these arrangements to help them pay £7.8 billion in tax.
In summary, as the tax deadline looms, it’s crucial for taxpayers to be aware of their obligations, file on time, and explore options like time to pay arrangements to avoid increased penalties and interest charges. The current economic landscape and the surge in new filers highlight the importance of staying informed and taking proactive measures to manage tax responsibilities effectively.
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