penalties for missing tax deadlines

What are the Penalties for Missing Tax Deadlines?

In simple terms, penalties for missing tax deadlines in the UK can lead to extra costs that can quickly add up. It’s crucial to prioritise tax tasks and avoid delays to avoid these penalties. However, you must appeal promptly and provide solid evidence.

By staying on top of tax tasks and seeking help when needed, you can avoid financial penalties and keep your finances in order. Tax compliance is essential, and a little attention to deadlines can save you a lot of money and stress in the long run. Stay organised, seek help when needed, and prioritise tax deadlines.

 

 

What are the Penalties for Missing Tax Deadlines?

Here is a breakdown of penalties for missing filing and tax payment deadlines in the UK.

 

1- Late Filing Penalties

If you miss the tax return deadline, HMRC will automatically charge a £100 penalty.

 

Daily Penalties

If you still haven’t filed your tax return after three months, HMRC will start charging daily penalties of £10 per day, up to a maximum of £900.

 

Maximum Penalty

The maximum penalty for late filing is £1,600 (£100 initial penalty + £900 daily penalties + £300 additional penalty + £300 additional penalty).

 

Appealing Penalties

If you have a reasonable excuse for missing the deadline, you can appeal the penalties. HMRC will consider appeals based on circumstances beyond your control, such as illness, bereavement, or technical issues.

 

2- Late Payment Penalties

If you don’t pay your tax bill on time, HMRC will charge an initial penalty of 5% of the unpaid tax. This penalty applies to personal, business, and partnership tax payments.

 

Additional Penalties

If you still haven’t paid your tax bill after six months, HMRC will charge an additional 5% penalty for the unpaid tax. Another 5% penalty will be charged if you haven’t paid after 12 months.

 

Maximum Penalty

The maximum penalty for late payment is 15% of the unpaid tax (5% initial penalty + 5% additional penalty after six months + 5% additional penalty after 12 months).

 

Interest Charges

In addition to penalties, HMRC will also charge interest on unpaid tax and penalties.

 

Calculating Penalties and Interest

Penalties and interest are calculated based on the amount of tax owing, not the amount paid. So, even if you’ve made some payments, you’ll still face penalties and interest on the remaining balance.

 

Appealing Penalties

If you have a reasonable excuse for missing the payment deadline, you can appeal the penalties. HMRC will consider appeals based on circumstances beyond your control, such as illness, bereavement, or technical issues.

 

What are Interest Charges in this Regard?

HMRC charges interest on unpaid taxes and penalties, including late payment penalties. The interest is calculated on the amount owing, not the amount paid.

 

Interest Rate

The interest rate is currently 4.25% per annum, but it can change over time. The rate is set by HMRC and is applied to the outstanding balance.

 

Calculation of Interest

Interest is calculated daily, so the sooner you pay, the less interest you’ll owe. The interest is compounded, meaning it’s added to the original amount, and then interest is charged on the new total.

 

Interest on Penalties

Interest is also charged on penalties, including late payment penalties. This means that if you’re charged a penalty, you’ll also face interest on that penalty.

 

Appealing Interest Charges

While you can’t appeal the interest rate, you can appeal the interest charges if you have a reasonable excuse for not paying on time. HMRC will consider appeals based on circumstances beyond your control.

 

What are Exceptions and Appeals in this Regard?

Acceptable reasons for missing a deadline or payment include:

  1. Illness or hospitalisation
  2. Bereavement or caring for a loved one
  3. Technical issues or computer failure
  4. Postal delays or lost documents
  5. Fire, flood, or other disaster

Unacceptable reasons include:

  1. Forgetting or not realising the deadline
  2. Lack of funds or financial difficulties
  3. Disagreement with HMRC or tax laws
  4. Not receiving a reminder or notification

If you have a reasonable excuse, you can appeal penalties and interest charges. You must appeal in writing, explaining the reason for your appeal and providing evidence to support your claim. HMRC will review your appeal and may request additional information or evidence. They will then decide to uphold or cancel the penalties and interest.

 

The Bottom Line

In conclusion, missing tax deadlines in the UK  is essential for individuals and businesses. This is to understand the importance of meeting tax deadlines and to take steps to ensure timely filing and payment. HMRC offers exceptions and appeals for reasonable excuses. However, it is crucial to provide robust evidence and appeal promptly.

If you are aware of the penalties and interest associated with missing tax deadlines, taxpayers can take proactive measures. Taxpayers can avoid the financial consequences of missing tax deadlines and maintain a healthy financial status.

 

Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!

 

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