A couple of years ago, HM Revenue and Customs (HMRC) introduced a strict penalty system whereby anybody required to file a self-assessment tax return form would incur costs for missing the deadline or even completing the form incorrectly. The minimum tax penalty you will incur is £100, but this could rise to double the amount of tax you owe.
Several years, sole traders and small business owners that earned less than £7,500 were not liable for tax and thus were not required to file a tax return with HMRC. This rule changed in April 2011 however, and anybody who is subject to income tax must file a Self Assessment Tax Return Form either by hard copy before October 31st or electronically using the online form before January 31st.
If you are exempt from paying tax therefore you will still be required to submit a nil return. One of the most common examples of a nil return is on capital gains tax which is currently £10,600 a year. For a full list you can refer to HMRC´s content heavy website or call a specialist at Taxaccolega on 08000 235 234 for a free advice.
Penalty charges for late tax return submissions
Penalty charges for late submissions are hefty to say the least and are dished out by HMRC if you return your self assessment tax return after the October or January deadlines, fill your form out incorrectly or fail to pay the amount you owe on time. Anybody deemed to be trying to evade paying tax are subject to even greater fines and possible criminal charges.
The current fines for general tax return failures are:
- 1 day – 3 months: £100
- 3 months: £10 for every day you fail to pay up to a maximum of 90 days (£900)
- 6 months: In addition to the above you will also incur a further £300 or 5% of the tax due, whichever is the higher
- 12 months: In addition to the above penalties you will be obligated to pay 100% of the tax amount due (double tax)
Incorrect return penalties
The harshest fine to incur is without doubt a penalty for filing an incorrect self-assessment tax return form – especially given the questions can be confusing and unclear. The limit of the fine depends on whether HMRC consider you have been careless or deliberately trying to deceive them in order to avoid paying the full extent of tax.
HMRC penalties for incorrect or misleading information are based on a percentage of the total amount of tax you owe – plus the full amount of tax payable. The percentages are as follows:
- Careless errors incur a penalty of up to 30% of the tax amount due.
- Fraudulent claims incur charges of between 20% to 70% depending on the severity
- If you underestimate the amount of tax payable and attempt to conceal the evidence you are liable for between 30% and 100% of the due amount
Self Assessment Tax Return forms are deliberately designed to catch tax payers attempting to avoid paying taxes, but inevitably snare honest tax payers which are held accountable by having to pay fines. If you are unsure whether you should be paying tax, need advice about the tax exemptions you are entitled to or would like help filling in your tax return form contact one of our specialists on 08000 235 234 or email email@example.com.