Self Assessment Penalties

Self Assessment Penalties

Guest Article from Tim Warr – Warr & Co Chartered Accountants

The self-assessment system was introduced in 1996 and at present HM Revenue & Customs require about 10 million individuals to file returns each year.

The system is policed by penalties which until 5th April 2010, remained very much the same.  Basically, a penalty of £100 was charged if a return was not filed on 31st January following the end of the tax year (31st October in the case of paper returns).

However, this penalty was limited to a maximum of one times the tax outstanding at 31st January.  So in practice a person avoided a penalty when filing late if they ensured that their liability had been paid in full by 31st January.  A second £100 penalty was charged if a return was still outstanding on the following 31st July.

In the case of persistent offenders, daily penalties can be applied when sanctioned by a Tax Tribunal.

Where tax was paid late, there was a 5% penalty applied to any amount outstanding one month after the due date and a second 5% penalty after a further six month.

Penalties for the year to 5th April 2011 and subsequently are changing.  In particular, a penalty will be charged even if there is no tax outstanding.  Penalties for late filing will be as follows: –

  • £100 where the return is 1 day or more late; and
  • £10 per day for up to 90 days where the return is filed more than 3 months late; and
  • £300 or if greater, 5% of the tax due when the return is filed more than 6 months late; and
  • a tax geared penalty of up to 100% of the tax due or £300 or if greater when the return is filed more than 12 months late.

There are new penalties too when tax is paid late. The existing 5% penalties at 1 month and 6 months remain, but there will be a third 5% penalty when tax is paid more than 12 months late.

Feel free to contact Tim Warr or Peter Edwards @ Warr & Co Chartered Accountants to discuss this further.