As HMRC can issue millions of late filing self-assessment penalties, you need to be aware of what self-assessment penalties are to avoid any unfavourable circumstances in this regard. You can even address the issue by explaining your valid reason to HMRC in case you fail to meet the filing deadlines for self-assessment. Moreover, this comprehensive guide will cover both aspects to avoid facing unfavourable circumstances and paying hefty fines. So, let us kick-start the discussion to gather more information.
What are Self-Assessment Penalties?
Here is an explanation of the ‘what are self-assessment penalties’ if the filing or payment is late in the UK.
1- Self-Assessment Late Filing Penalty in the UK
In the UK, Self-Assessment late filing penalties are fines imposed by HMRC on individuals and sole traders who fail to submit their tax returns on time. The deadline for Self-Assessment tax returns is January 31st, following the end of the tax year. A £100 penalty is due after the filing if the tax returns are late for three months. All you need to do is take care of the due date. If a person fails to submit a return, talk about all the withheld information, and HMRC will access the tax due.
How to Appeal for Self-Assessment Late Filing Penalties?
If you receive a penalty, you can appeal within 30 days. Provide reasonable grounds for the delay, such as serious illness or disability, bereavement, natural disasters, technical issues or HMRC errors.
What are the Reasons for Late Filing Penalties?
The main reasons for filing late can be missing the January 31st deadline, failing to submit complete or accurate tax returns, or not paying taxes on time.
Avoiding Self-Assessment Late Filing Penalties
This includes registering for Self-Assessment by October 5th, submitting tax returns online by January 31st, paying taxes on time, and communicating with HMRC regarding any issues.
2- Self-Assessment Late Payment Penalty in the UK
In the UK, Self-Assessment late payment penalties are fines imposed by HMRC on individuals and sole traders who fail to pay their taxes on time. The deadline for paying Self-Assessment taxes is January 31st, following the end of the tax year. If you are 15 days late, you pay none in the form of a penalty. In case you are 16-30 days late, the first penalty is 2% of the outstanding amount, and if you are 30 days late, there is an aggregate of 4% surcharge on day 31.
What are the Reasons for Late Payment Penalties?
Late payments can be due to missing the January 31st payment deadline, insufficient payments, and failed payment arrangements.
Penalty Calculations
4% surcharge on unpaid tax after 30 days.
How to Appeal Late Payment Penalties?
If you receive a penalty, you can appeal within 30 days. Provide reasonable grounds for the delay.
Avoiding Late Payment Penalties
To avoid late payment penalties, ensure to pay taxes online by January 31st, set up payment plans, and communicate with HMRC regarding payment issues.
What is Considered a Reasonable Excuse by HMRC?
HMRC considers reasonable excuses for late filing and payment of taxes. These excuses must be genuine, unforeseen, and beyond the taxpayer’s control.
1- Accepted Reasonable Excuses
Accepted excuses can involve hospitalisation, severe illness, or disability preventing filing or payment, death of a family member, close relative, floods, fires, or other natural disasters affecting records or payment. If the HMRC website or system fails due to internet connectivity problems, this can be considered. Unforeseen postal service disruptions, genuine mistakes or misunderstandings about filing or payment requirements, HMRC mistakes or delays in processing returns or payments are accepted as well.
2- Unaccepted Excuses
Lack of funds or cash flow problems, insufficient knowledge of tax laws or regulations, disagreement with tax laws or amounts due, and reliance on an agent or advisor are treated as unaccepted excuses.
How to Appeal?
Firstly, Contact HMRC within 30 days of receiving the penalty, explain the reasonable excuse in writing, and provide supporting documentation.
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Conclusion
In conclusion, if you are eligible to file tax returns in the UK, you need to understand what self-assessment penalties are. Facing the challenge of such penalties can bring a lot of financial stress to a business. However, you can avoid them if you ensure to keep accurate records and be aware of the deadlines. Even then, if you end up stuck in a situation where you have to pay hefty amounts of penalty but you have a valid reason for it, you must opt for appealing to address this issue promptly. You will be able to handle your self-assessment in a better way. Once you are confident to avoid the hefty amounts of fines and penalties, you will be able to focus on your business growth.
Disclaimer: All the information provided in this article on self-assessment penalties, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
