Late payment penalties for self-assessment tax returns

If you’re self-employed, it's your responsibility to pay your taxes on time and file your self-assessment tax return. If you miss the deadline or pay late, the tax office will come knocking with their fines. So, let's get the lowdown on the different penalties HMRC has in store for us.

What penalties can I be charged for by HMRC?

There are various self assessment late payment penalties that you might receive, all for different reasons. The most common, however, are late submission and late payment, which we explain in more detail below, alongside some others.

1. Late payment

If you're late paying your taxes, you'll be charged a penalty interest of 2% on your tax bill at 15 days late. After 30 days, another 2% penalty is added, giving you an effective 4% penalty rate on late payments. Ouch! Plus, your tax bill will keep going up steadily after 30 days of non-payment. And as if that wasn't enough, you'll also be charged an interest rate of 2.5% plus the Bank of England rate.

2. Late submission

Submitting your tax return after the deadline will get you slapped with a £100 penalty. The deadline is of 31st January for online submissions and 31st October for paper submissions. On top of that, you'll also be charged a 2% interest on the tax bill at 15 days late, with another 2% penalty added after 30 days of non-payment.

So, once again, you're looking at an effective 4% penalty rate on late payments, which could result in your tax bill ballooning after 30 days of non-payment.

3. Failing to notify

If you don't let HMRC know about your tax liability, you'll be charged a penalty ranging from 0-100% of the overall tax bill, depending on whether your failure to notify was accidental or deliberate. This is calculated and ‘potential lost revenue’.

4. Errors

Misrepresenting or understating your tax liability will get you charged with a penalty fee ranging from 0-100% of the outstanding tax bill. Yikes!

Reasonable excuses

Now, if you have a reasonable excuse for missing the tax deadlines, such as bereavement, severe illness, or unexpected hospital stays, you can appeal the penalty. HMRC expects you to take 'reasonable care' with your self-assessment, so keep accurate records and seek professional advice if you need it. Technical issues are also valid.

Can I appeal a penalty?

Getting a penalty from HMRC is about as fun as a trip to the dentist. But - in a word - yes, you can appeal a penalty, if you've got a reasonable excuse. Just keep in mind that the process varies depending on whether you're dealing with direct taxes like Income Tax, Capital Gains Tax, and Corporation Tax or indirect taxes like VAT.

The good news is that you won't have to pay the penalty until HMRC completes its review of your appeal. So, you can kick back and relax while they sort it out. Here's the lowdown on how to appeal and pay for self-assessment late payment penalties:

How to appeal late payment self assessment penalty

HMRC will offer you a review at the same time as issuing you the penalty decision for indirect taxes, such as VAT. You can accept this review, or you can appeal to a tax tribunal.

To appeal direct tax (e.g. Income Tax) penalties, you’ll have to ask HMRC to review your case again and consider your appeal – either online through the Government Gateway portal or by post. You can find out more here.

How to pay self assessment late payment penalties

There are several ways to pay a penalty – online, by direct debit or bank transfer, with a personal debit or corporate credit card, or by postal cheque. Unfortunately, you can’t pay your penalty at the Post Office anymore.

How can Caroola help?

Keeping track of your tax obligations can be a real pain, especially when you're busy running your own business. But don't fret.

With our accountancy packages starting at just £40 a month, Caroola is here to support you with all your tax and accountancy needs – including filing your self-assessment tax return.