What Happens If You Don’t File Your Self- Assessment Tax Return?

Tax accountant London
If a business does not comply to the self-assessment tax return requirements and fails to meet the submission deadline, a business can suffer from serious fines and/or penalties.

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When Can HMRC Give Penalties?

HMRC can impose penalties for various reasons related to tax compliance:

  • Late submission: If tax returns are submitted late, penalties can apply, starting from £100 and increasing over time.
  • Late payment: Failure to pay taxes on time can result in penalties. The amount depends on the outstanding tax and the delay in payment.
  • Inaccuracies: If tax returns contain errors, HMRC may issue penalties, especially if the inaccuracies are deemed deliberate and concealed, ranging from 30% to 70% of the extra tax due.
  • Tax evasion: Deliberate attempts to evade taxes can lead to significant penalties, including fines and potential legal consequences.
  • Other liabilities: Penalties can arise if taxpayers fail to inform HMRC about tax liabilities promptly.

Penalties Charged For Late Submissions:

When it comes to late submissions of tax returns in the UK, there are penalties in place to encourage individuals to file their returns on time. The penalties charged for late submissions vary depending on the delay period and the type of tax return. The information below is elaborated from the official UK government source, specifically from the page titled “Penalties for late submission” located at www.gov.uk.

For individuals who fail to submit their Income Tax returns by the deadline, which is usually by midnight on the 31st of January following the tax year, the penalties are as follows:

  • Initial Penalty: If the tax return is up to 3 months late, there is an initial fixed penalty of £100 which is charged even if there is no tax to pay or if the tax due has already been paid on time.

  • Daily Penalties: If the tax return is more than 3 months late, a daily penalty of £10 per day is charged, accumulating for up to 90 days. This means that an additional charge of £900 can be added to the initial fixed penalty.

  • Late-Filing Penalties: After 6 months, an additional penalty of £300 or 5% of the tax due (whichever is higher) is charged. This amount will increase further after 12 months if the return is still outstanding.

Interest Charged for Late Payments:

  • If the payment is made 30 days late, then the amount of interest charged is 5% of the tax liability.
  • If the payment is made 6 months late, then the amount of interest charged is a further 5% of the tax liability.
  • If the payment is made 12 months late, then the amount of interest charged is a further 5% of the tax liability.

If a Business Makes an Error, the Amount of Penalty Depends Upon:

  • HMRC assessment of the situation.

 

  • Whether the business had told HMRC about the error.

 

  • Amount of tax which has been underpaid.

How to Minimise Tax If an Error Has Been made

There are a a few steps your must take if an error has been made while filing your self-assessment tax return:

  • Inform HMRC.

 

  • Assist HMRC in calculating the amount of tax due.

 

  • Inform HMRC of the information easing their ability to assess the tax due

What Should You Do If Your Business Has Estimated Figures?

If a business has estimated figures then it’s important to disclose the reason they were used. If the business has made a tax return and then receives the correct figure, it’s important to make changes to the tax return immediately.  This can be done by either contacting HMRC directly or correcting the information on your personal tax account.

HMRC Special Reduction:

HMRC can often reduce the penalty if they assess that the taxpayer has made a mistake carelessly rather than being deliberate.

Penalties Relating to Other Countries

If a taxpayer states the wrong income they earned from other countries, then the amount of penalty the business has to pay depends upon the country.

Appeal

If a taxpayer thinks that the decision taken by HMRC is wrong, they are able to appeal against the decision. The taxpayer is required to make the appeal within 30 days of the decision.

Overall, the blog has considered the result of omitting true taxable income, and the penalties charged on late payments.

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