Want to avoid fines from HMRC? Here’s how

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June 24, 2024

No-one likes to pay more to the taxman than they have to, but if you fall foul of HMRC’s rules, you could find yourself paying a penalty, and interest if things are not sorted out quickly.

There are various fines you could face from HMRC if you get things wrong, and here we go through a few of them to help you avoid them.

The easiest fines to avoid

Anyone who must file a self-assessment return should know that the paper return is due by October 31, and the online return is due by January 31 of the following year for the previous tax year. Failing to file on time will lead to a £100 penalty. If the return is more than three months late, you will be charged an additional £10 per day, until you reach a maximum of £900.

If you still fail to file, you can face an extra £300 fine for not filing before six months, or a penalty of 5% of the tax due, whichever is higher. You would face an additional 5% of tax due or £300 penalty, again whichever is higher, if you have still not filed the return after 12 months. So, these fines can stack up quickly.

Late payments will also incur penalties – a penalty of 5% of the tax due will need to be paid if the tax has not been paid within 30 days of it being due. A further 5% will be charged additionally at six months and 12 months if the payment has still not been made. So, you should make sure you are filing on time and paying on time whenever you can, which is something your accountant can help you with.

If you are unable to pay your tax for any reason, you should get in touch with your accountant and HMRC as soon as possible to work out a payment plan. Once this is in place, these penalties should not be applied. You may have a reasonable excuse, such as a close relative dying close to when the tax return was due, or that you were having to stay in hospital. If that is the case, then tell your accountant or HMRC directly to stop the penalties stacking up.

Failure to notify and inaccuracy penalties

If you fail to notify HMRC that you should be paying a specific tax, such as VAT for example if your business breaches the £90,000 VAT registration threshold, then you could face a ‘failure to notify’ penalty of between 0% and 100% of the tax owing.

You may also face a similarly applied inaccuracy penalty, but whether you will be charged at all will depend on whether HMRC feels your mistakes have been careless, deliberate, or deliberate and concealed.

Keeping good records and making sure you are on top of your administration is the best way to avoid these kinds of penalties. You should also keep in touch with your accountant if you have any problems that could see you miss filing deadlines or payments, as they will be able to help you.

We can help you meet your obligations

You should never leave your taxes to chance, especially if you feel you might do something wrong. So, please ask us for advice and we can explain everything you need to know.


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