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UK Penalty Regime - Everything you need to know about the HMRC Penalties

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If you pay tax in any country, it is important to be aware of the penalties you may face if you fail to file your tax return on time. 

In this article, we will discuss the UK Penalty Regime which came into force from the 2010/11 tax year onwards. 

The HRMC can charge you a penalty for the following: 

  • Errors on tax returns or paperwork 

  • Late filing 

  • Failure to notify changes to tax liability 

  • Late tax payments

If you’re a UK taxpayer, find out everything you need to know about the UK Penalty Regime in the article below!

The average UK tax rebate is £963

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What penalties apply if I make a tax payment late?

If you file your UK tax return past the deadline, the HRMC will charge interest on your payment. 

Interest will be charged from the day of the deadline to the day you make the payment. 

Table: Penalties for late tax payments

Time

Penalty

30 days late

5% of the tax payment outstanding

5 months are initial penalty/6 months late

Another 5% of the tax payment outstanding

6 months after second penalty/12 months late 

Another 5% of the tax payment outstanding

If you pay a penalty late, the HMRC will also charge you a penalty on this payment.


What are the penalties if I file my UK tax return after the deadline? 

Even if you do not owe money to the HMRC, you will still be penalised if you file your tax return past the tax deadline.

If you receive a penalty for late submission, the HMRC will notify you by sending you a letter. 

If you miss the tax deadline the following penalties will apply to you: 

  • £100 for missing the deadline;

  • £10 a day for every day missed in the following 3 months;

  • If you've still not filed within 6 months of the deadline, an additional penalty is applied of £300 or 5% of the tax, whichever is higher;

  • If your return is still outstanding 12 months after the deadline, an additional penalty is applied of £300 or 5% of the tax, whichever is higher. In serious cases, you may receive a penalty of 100% of the tax.

Under this system you could in theory incur penalties of £1,300 if you have not filed within 6 months of the deadline. 

Avoid these penalties and file your UK Tax Return with Taxback.com today!

What are the penalties for offshore evasion?

The penalties will be linked to whether the territory in which the income or gain arises is transparent in regards to taxes.

Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.

There are three categories of penalties for offshore evasion:

 1. Where the income or gain arises in a territory in 'category 1', the penalty rate will be the same as under existing legislation

2. Where the income or gain arises in a territory in 'category 2', the penalty rate will be 1.5 times that in existing legislation - up to 150% of tax

3. Where the income or gain arises in a territory in 'category 3', the penalty rate will be double that in existing legislation - up to 200% of tax

 

What penalties apply if I make an error on my tax return or with a tax payment? 

If you make an error on your tax return or relevant documents, you may face a penalty from the HMRC.

You will be charged a penalty if errors on your tax return, payment or document: 

  • Underestimate your tax liability 

  • Misrepresent your tax liability 

If the HMRC receives a document with an error, they will charge a penalty if the error is:

  • Deliberate

  • A result of a lack of reasonable care given

  • Deliberate and concealed i.e steps are taken to conceal the error

If you fail to disclose to the HMRC that an assessment is too low, you will face an “inaccuracy penalty”. 

If the penalty is as a result of a lack of “reasonable care” the penalty amounts to 0-30% of the additional tax due. 

If there is a deliberate error, the penalty will amount to 20-70% of the additional tax due. 

If there is a deliberate and concealed error, the penalty will amount to 30-100% of the additional tax due. 

The average UK tax rebate is £963

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What penalties apply if I fail to notify HMRC of changes to my tax liability? 

If you fail to notify HMRC of any changes that affect your tax liability, you may incur a penalty known as the “failure to notify” penalty. 

This penalty is calculated based on the amount of tax that was unpaid as a result of your failure to notify. 

The HMRC may decide to reduce this penalty if you cooperate with them and tell them about the failure to notify. 

If you have a “reasonable excuse” for the failure to notify, you will not incur a penalty. 

The amount of the penalty depends on whether you were prompted or not to disclose the failure to notify. 

Table: Failure to notify penalties

Disclosure type

Reason 

Penalty (percentage of unpaid tax payment)

Prompted

Not deliberate

Within one year: 0-30%

After one year: 20-30%

Unprompted

Not deliberate 

Within one year: 0-30%

After on year: 10-30%

Prompted

Deliberate

35-70%

Unprompted

Deliberate 

20-70%

Prompted

Deliberate and Concealed

50-100%

Unprompted

Deliberate and Concealed

30-100%

 

Being charged a penalty by HMRC is certainly not ideal, however in order to avoid this, you must accurately prepare and file your UK tax return on time. 

If the thought of filing a HRMC tax return sounds boring and complicated to you, we understand!

But don’t worry! Taxback.com is here to help!

At Taxback.com we offer a simple, online tax return service. 

We will prepare and file your UK tax return and ensure you are fully tax compliant. 

We will also ensure that if you are due a tax refund that you receive your maximum legal UK tax refund. 

The average UK tax rebate is £963

GET YOURS NOW


Save yourself the hassle of preparing a tax return and worrying about incurring penalties for late submission! 

File your UK tax return with Taxback.com today!

About The Author

Kate Reville - Marketing Executive @ Taxback.com

Kate creates content for Taxback.com covering top tips to help our readers save on their tax bill! In her spare time, Kate likes travelling, cooking and watching Netflix!

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