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Tax Penalties: You can be charged for filing late, inaccurate filing and failing to notify

Tax Penalties: You can be charged for filing late, inaccurate filing and failing to notify

Paying taxes is a legal obligation for individuals and businesses in the UK. On that basis, failing to comply with tax regulations can result in penalties and fines. HMRC (His Majesty’s Revenue and Customs) is responsible for enforcing tax laws and collecting taxes. In this newsletter, we will discuss the types of tax penalties that HMRC may impose.

Types of HMRC Tax Penalties:

  1. Late filing penalties: If you miss the deadline to submit your tax return, you may be subject to a late filing penalty. The penalty amount varies based on the length of the delay and the type of tax return. For example, the penalty for self-assessment tax returns is £100 if you are up to three months late, and it increases after that period.
  2. Late payment penalties: If you do not pay your tax bill by the deadline, you may be subject to a late payment penalty. The penalty amount is 5% of the unpaid tax after 30 days, and it increases after that period. If you still do not pay after six months, there will be another 5% penalty, and after 12 months, there will be a further 5% penalty.
  3. Inaccurate tax returns penalties: If you make a mistake on your tax return that leads to underpayment of tax, you may be subject to an inaccuracy penalty based on a percentage of the tax owed. The penalty amount can be up to 30% of the tax owed, depending on the severity of the error and the level of disclosure.
  4. Failure to notify penalties: If you fail to notify HMRC of a change in your circumstances that affects your tax liability, you may be subject to a failure to notify penalty based on a percentage of the tax owed. For example, if you start receiving rental income but do not notify HMRC, you may be subject to a penalty of up to 30% of the tax owed.
  5. VAT penalties: If you are registered for VAT and fail to comply with the rules and regulations, you may be subject to a range of VAT penalties. These include late filing penalties, late payment penalties, and penalties for errors or omissions in your VAT return. The penalty amount varies based on the severity of the non-compliance.

HMRC tax penalties are imposed to encourage compliance with tax laws and regulations. Failing to pay or file taxes on time or making errors on your tax return can lead to penalties and fines. 

Inaccuracy penalties can be simply avoided by keeping your expenses records intact. These are normally receipts to evidence the expenses. If you find it difficult keeping your paper receipts all year round, we recommend the Proceipt app for you to store your receipts in real time. If you run a business, we recommend the Proceipt business receipt management infrastructure for you to manage your team’s receipts in real time.

It’s important to keep up to date with your tax obligations and seek professional advice if you are unsure about any aspect of your tax affairs. Remember, the penalty amounts and rules can change over time, so it’s always a good idea to check the latest information on the HMRC website or seek the Many times, there would be a chance to appeal against the penalties charged by the HMRC. The HMRC will always advice you on your right to appeal when they charge you penalties that are appealable. We will discuss how appealing penalties in our subsequent newsletters.