Under the current regulations, penalties for late submission of a self-assessment tax return as follows:
· One day late: A fixed automatic penalty of £100, applicable even if no tax is owed or if the owed tax has been paid on time.
· Three months late: £10 per day, up to a maximum of £900 for 90 days.
· Six months late: £300 or 5% of the tax due, whichever is higher.
· 12 months late: £300 or 5% of the tax due, whichever is higher.
· 13 Months + Late: Deliberate or concealed withholding of information beyond 12 months may incur additional penalties.
For late tax payments, the current rules are:
· 30 days late: 5% of the tax due.
· Over five months after the first penalty: 5% of outstanding tax at that date.
· Over 11 months after the first penalty: 5% of outstanding tax at that date.
Why are penalties for late self-assessment returns and late tax payments changing?
The changes in penalties for late self-assessment returns and tax payments were initially announced as part of the Spring 2021 Budget by then Chancellor Rishi Sunak. These reforms aim to establish a fairer, more effective, and consistent points-based system across taxes, focusing on persistent offenders rather than occasional lapses.
When will penalties for late self-assessment returns and late tax payments change?
The new penalty system for late VAT returns and payments has already been implemented, while for self-assessment, it will be introduced in April 2026.
It is linked to the phased introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) which requires businesses, self-employed individuals, and landlords to keep digital records and us Businesses, self-employed individuals, and landlords with income over £50,000 will be mandated to join first from April 2026.
The rules will apply to those with income over £30,000 from April 2027.
For those with a lower income, a written statement to Parliament by Victoria Atkins, Financial Secretary to the Treasury, said: “The Government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the Making Tax Digital for Income Tax Self-Assessment service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. ”MTD-compatible software to submit updates to HMRC.
How will the new late submission penalties for self-assessment work?
Under the new system, a point will be received every time a self-assessment tax return submission deadline is missed. Once a certain threshold of points is reached, a £200penalty will be charged. A further £200 penalty will be charged for every subsequent late submission, but the taxpayer’s points total will not increase.
The penalty thresholds will be as follows:
Once a penalty threshold has been reached, points will be reset to zero if all returns are submitted on time during what HMRC describes as a “period of compliance”.
The periods of compliance are as follows:
There are more details in a Government policy paper here.
How will the new late payment penalties for self-assessment work?
The new system involves a first penalty followed by a second penalty if the payment remains overdue.
A penalty will not be charged if the outstanding tax is paid within the first 15 days after the due date. The first penalty is charged if the payment is overdue by 16 or more days. The second penalty is charged when a payment is 31 or more days overdue.
For the first penalty, the amount is 2% of the tax due after day 15. The second penalty is 2% of the tax outstanding after day 15 plus 2% of the tax outstanding at day 30. There are more details in a Government policy paper here.
The benefits of submitting your self-assessment tax return early
To avoid penalties, you need to file your tax return and pay your taxes on time.
While you can file up to 11.59pm on deadline day, there are many benefits to filing early. They include:
- You may be due a tax refund for various reasons such as excessive payments on account based on the previous year's income. The sooner you file, the sooner any refund you are due can be processed.
- Filing your tax return early can help you manage your business’ cash flow. Knowing exactly how much your tax bill will be in advance will help you to plan effectively for how you will be able to pay it.
- Getting your tax return out of the way can free up time for you to focus on growing your business.
Contact us if you still need a Self Assessment Tax Return submitted for the Tax Year 2022/23.
