Late filing penalties for self assessment tax returns 2nd March 2012

Posted in: Personal Tax

We all know that there is a £100 late filing penalty if we don’t file our self assessment tax returns by 31 January. Unfortunately, that’s not the end of the story. What happens if after a few months we still haven’t filed our return? The following example should illustrate the additional late filing penalties that may be incurred for self assessment tax returns.

Alice owes tax of £500, but misses her filing date on 31 January. She gets an immediate £100 penalty.

Alice means to file her return as soon as she can, but her dog ate her paperwork. After 3 months additional penalties will be applied of £10 a day for a maximum of 90 days.

After six months, Alice still hasn’t filed her return and more penalties are applied. This time, it’s 5% of the tax due or £300 – whichever is the greater. So Alice gets another £300 added to her penalty.

After twelve months Alice, still not having filed a return, gets another penalty of 5% of the tax due or £300 (whichever is the greater).

From this we can see that for not filing her penalty for twelve months Alice has picked up the following penalties:

  1. £100 late filing penalty, 31 January
  2. £900 of daily penalties after 3 months
  3. £300 after 6 months
  4. £300 after 12 months

This comes to £1,600 just for not filing her return for the last 12 months – ouch!

Note that it is irrelevant whether or not Alice owed tax or was due a refund in the first instance. Late filing penalties apply regardless of whether there was any tax to pay or not.

On top of this Alice still has to pay her £500 tax and now has to pay interest on the overdue tax.

The moral of this is to get your tax return in on time and don’t get a dog. Get a cat instead!