Number submitting tax returns late DOUBLES with 1.1m now dealing with fines of as much as £1,500

More than a million taxpayers face harsh penalties for missing the self-assessment deadline and filing their tax return late, a major accountancy firm warns.

HMRC ramped up warnings ahead of the 31 January deadline, but the number of taxpayers who filed late nearly doubled to 1.1 million taxpayers compared to the previous tax year, according to accountancy firm Blick Rothenberg.

Robert Salter, a director at the firm, said the figures were a ‘major concern’ and would come at a significant cost to the Treasury.

Income tax, National Insurance and capital gains tax all fall under the self-assessment remit and represent approximately a third of the UK’s total tax gap of £39.8billion, Blick says. 

‘With the numbers of people filing late having almost doubled this tax year, the gap will only widen,’ said Salter.

‘Because of late filing, HMRC’s resources are focussed on chasing up outstanding tax returns and issuing penalties to those who have failed to meet the return deadline, and this prevents HMRC from focussing on individuals who are deliberately committing tax fraud or unethical ‘tax promoters’, who are flogging dodgy tax avoidance schemes.’

Late charges: Over 1m taxpayers will have to pay penalties for missing the deadline

More people than ever had to complete a self-assessment tax return as frozen thresholds bring more of people’s savings interest, dividend income and capital gains into tax.

More people paid through PAYE may also have had to file a tax return because their total taxable income jumped above the £150,000 threshold at which all earners must submit a tax return.

For those who failed to file on time, they will face an initial £100 penalty, and if it is still not paid after three months they will face additional charges of £10 per day, up to a maximum of £900.

After six months, a further 5 per cent will be added to the amount due or £300, whichever is greater. And after 12 months, another 5 per cent or £300.

Late payment charges will reduce from 7.25 per cent to 7 per cent on 17 February, after the Bank of England cut the base rate from 4.75 per cent to 4.5 per cent.

HMRC calculates interest by adding 2.5 per cent to the base rate but its repayment interest is set at the base rate minus 1 per cent. 

It means that if you are late to file you will pay nearly double in interest compared to any amount that HMRC owes you.

Salter added: ‘Taxpayers who are delaying their return because they believe they are due money back from HMRC or have no tax liability will still accrue missed deadline penalties.

‘It is quite possible for taxpayers to end up with late filing penalties of £1,500 for a tax year even when they have overpaid their taxes.’