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Accountancy bodies are warning that up to a million taxpayers could be caught by new penalties for late tax returns, and say HMRC have not done enough to publicise the changes.
Previously, if you did not owe tax for the year in which the tax return relates, then you would not incur a late filing penalty. However, the new penalty regime now penalises those with no tax liability.
New Late Filing Penalties
• One day late - an initial penalty of £100 (even if you have already paid all the tax you owe).
• Three months late - you will be charged automatic daily penalties of £10 per day, up to a maximum of £900.
• Six months late - you will be charged a further penalty, which is the greater of 5% of tax due or £300.
• Twelve months late - another penalty, which is the greater of 5% of tax due or £300 (and possibly a higher penalty of up to 100% of the tax due).
These penalties will apply from October this year for those filing paper returns. From 31 January next year the same rules will apply to those who file their form online.
Therefore, if a return due by the end of January 2012 was not filed until 5 August 2012, penalties totaling £1,300 could be incurred.
Penalties for paying late
There are also penalties charged for people who pay their tax late:-
• Thirty days late - an initial penalty of 5% of the tax unpaid at that date.
• Six months late - a further penalty of 5% of the tax that is still unpaid.
• Twelve months late - a further penalty of 5% of the tax that is still unpaid.
Interest will also continue to be charged on any outstanding tax payments.
It is easy to see that by not keeping your tax affairs up to date, penalties can start to mount very quickly.
The simple way to avoid these penalties is to keep your affairs up to date.
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