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News » Penalties
Most people who have been submitting tax returns for some time are aware of the penalty for late submission of a tax return and not paying tax on time. However since 6th April 2011 the rules have changed and not knowing whats new can cost in excess of £1500 in certain cases.
On the old regime penalties started at £100 but could be knocked out if there was a refund due or if the tax was less then £100 in which case it would be whatever the tax was. In once instance a client of ours had a .22p tax bill and because the penalty had to pay .44p to HMRC. However this penalty never acted as much of a deterrent which is why the system has changed.
For starters there is a £100 penalty for being a day late, irrespective of any tax due or if the tax has been paid but the return hasn't been submitted. Still nothing to get hot under the collar but it gets worse. If the return is up to three months late there can be penalties of up to £10 per day up to £900. So that's a running total of £1000 if your return is submitted in April. Six months late and it's the higher of £300 of 5% of the tax due as well as the previous penalties. Twelve months late and another £300 or 5% as well as previous penalties, totalling £1600 even if there is no tax due! In serious circumstances a penalty of 100% of tax maybe enforced.
Because the penalties wont be churned out until after January we have no way of knowing if they will charge £10 a day or how lenient they will be. But the lesson is DON'T leave it till the last minute!