Self Assessment Penalties

With the deadline for submitting 2014/15 self assessment returns looming this Friday it seems topical to review the penalties around self assessment.

There are penalties for:

  • Not informing HMRC that a self assessment return is necessary (failure to notify)
  • Late submission of a return
  • Late payment of tax

The penalties for failure to notify depend on the behaviour of the taxpayer, whether the notification was prompted by HMRC or unprompted and the amount of tax that has been avoided. The penalty is based on a percentage of the tax avoided and can range from 0 to 200% of the tax that hasn’t been paid. This is obviously on top of the tax that is due!

Late submission results in a penalty of £100, followed after 3 months by penalties of £10 a day up to 90 days. Over 6 months and tax related penalties kick in.

Late payment of tax incurs interest, but if the January balancing payment is late by 30 days an additional 5% penalty will be imposed, followed by an extra 5% at both 6 and 12 months.

The penalty regime is complicated and punative so it is obviously best to submit returns on time. The taxpayer has a year to amend a return so even putitng an estimate on a return and submitting it and amending it later is prefereable to not filing at all.