Shortly HMRC will begin their annual crusade to get people to submit their self assessment returns before the deadline of 31st October 2014 (if you file the “old way”, i.e on a paper form) or 31st January 2015, if you are registered for online filing. In addition to this you must pay any tax due as a result of this by the 31sy January 2015. The penalties for this have increased manyfold over the last few years – as recently as 2010 if you failed to file on time the maximum fine you could receive was £200. Now – the fine can total as much as £1300 – or higher, depending on the amount of tax due. And yet some people still choose to be late.
In addition to this are the penalties for not paying tax on time, plus interest. Interest is currently charged by HMRC at the very reasonable rate of 3%. However there is also a surcharge of 5% of the tax due for being 30 days late, another 5% for being 6 months late, and another 5% if you are over 12 months late. So if you owed £1000 in tax for example and paid a year and a day late, your total payment would be:-
Plus 5% for 1 month late = £50
Plus 5% for 6 months late = £50
Plus 5% for 1 year late = £50
Plus 3% interest = £30
So your total bill for the year would be £1180 in tax. Not including the fines for being late with filing.
If this doesn’t make sense to you, then you’re not alone!