Self Assessment Tax Penalty and Appeals

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Compliance with the legal requirement of submitting a self-assessment tax return is mandatory for many UK taxpayers. Failure to comply with this obligation or delay in making tax payments could result in penalties, causing a considerable impact on your financial standing and creditworthiness.

Penalties for Late Filing of Self Assessment

If you don’t submit your self-assessment tax return on time, you’ll be charged a penalty. Deadlines are the 31st of October for paper tax returns and the 31st of January for online submissions. The immediate penalty for late filing is £100, applied right after the deadline. If your return is still not filed three months past the deadline, an extra penalty of £10 per day will be imposed for up to 90 days, accumulating to £900. If six months elapse, an additional penalty of £300 or 5% of the due tax (whichever is higher) will be charged.

Penalties for Late Payment of Income Tax

If you settle your tax bill promptly, a penalty is not imposed. The initial penalty is 5% of the due tax, applicable after 30 days from the payment deadline. A further 5% is charged after six and twelve months, respectively.

Penalties for Errors in Income Tax Returns

Penalties may apply if HM Revenue and Customs (HMRC) identify errors in your tax return. The penalty’s size depends on the nature of the error and whether it was intentional or unintentional.

How Penalties Are Calculated

The penalty amount is determined by the type of penalty and the time elapsed since the deadline. Similarly, late payment penalties work in the same way. For instance, a delay in paying your tax bill will lead to a 5% charge of the due tax after 30 days. An additional 5% penalty is imposed after six and twelve months.

Financial and Credit Rating Impact

Late filing, payment, and error penalties can heavily impact your finances and credit rating. Notably, late filing penalties can accumulate quickly. If six months pass without filing your tax return, you could face a penalty of up to £1,600. Late payment penalties can also be expensive, with delayed tax bill payments leading to up to a 15% penalty of the due tax.

Unsettled taxes could see HMRC initiating legal action against you, potentially resulting in court fines or bankruptcy. Failing to pay your taxes can harm your credit score and make it difficult for you to obtain credit in the future.

Appealing Against HMRC Decisions

If you disagree with HMRC’s decisions, a formal appeals process is in place to challenge their verdicts. The process is guided by the Taxes Management Act 1970 and associated regulations, and it’s designed to be fair, transparent, and accessible to all taxpayers.

The Appeals Process: The appeals process provides a platform for taxpayers to contest HMRC’s decisions on their tax affairs. This should be the last resort after trying to resolve the issue directly with HMRC.

Types of Appeals: There are two types of appeals: reasonable excuse and penalty. Reasonable excuse appeals come into play when unavoidable circumstances prevent taxpayers from fulfilling their tax obligation. Penalty appeals are used when a taxpayer feels a penalty has been wrongly or unfairly imposed.

Preparing and Submitting an Appeal: To prepare and submit an appeal, follow these steps:

    • Collect all relevant documents and information related to the appeal.
    • Identify the type of appeal to make
    • Write a clear and concise statement stating the grounds for appeal, supported by evidence.
    • Submit the appeal to HMRC online, by post, or by fax.
    • Wait for HMRC’s written decision.

Appeals Time Frame: The appeals time frame varies based on the appeal type. Reasonable excuse appeals should be made within a reasonable time after the preventing event. Penalty appeals must be made within 30 days from the penalty notice date.

For HMRC to make assessments, the time limit varies depending on the tax type and the taxpayer’s situation. In general, the time limit for income tax is four years from the end of the tax year related to the assessment and six years for corporation tax from the end of the accounting period. However, if a taxpayer has deliberately hidden information or committed fraud, there is no time limit for HMRC to make an assessment.

If you disagree with an HMRC assessment, you can challenge it. You can request an internal review within 30 days of the assessment date. If unsatisfied with the internal review, you can appeal to the First-tier Tribunal (Tax Chamber) within 30 days of the internal review decision.

Staying informed on Self Assessment tax return penalties and appeals is key. Regular updates on HMRC’s guidelines and regulations are crucial to avoid penalties and successfully manoeuvre through the tax return process. It’s important to remember that getting professional advice can be beneficial when handling complex tax matters.

In conclusion, taxpayers can evade penalties by timely and accurate tax return submissions, making necessary appeals, and staying informed on the latest guidelines and rules. With the right preparation and knowledge, taxpayers can smoothly navigate the Self Assessment tax return process and avoid penalties. If you are self-employed and have received the notice of penalty from HMRC, for late filing or late payment of self-assessment tax, call our number right now at 0800 135 7323 to book an appointment with a specialist Tax Accountant

Disclaimer

Our blogs and articles are for information only. If you need help with your specific tax problem or need advice for your business please call us on 0800 135 7323