H M Revenue and Customs have announced a new penalty regime for late payment and filing penalties which could be more costly for clients who repeatedly miss deadlines.

The proposed changes which were announced in the 2021 Budget as part of the Finance Bill will apply to those in Self Assessment with business or property income over £10,000 from 6th April 2023.

The new penalty regime will penalise taxpayers who persistently submit tax returns late or make late payment of tax, whilst being more lenient on those who make the ‘occasional slip up.’

Self Assessment taxpayers currently receive a £100 penalty as soon as a Return is late with a £10 daily penalty applying if the Return is still due three months later. A penalty of £300 or 5% of the tax liability (whichever is greater) becomes due if the Return is not submitted 6 months after the deadline.

Under the new regime, taxpayers who miss a submission deadline will be notified by HMRC that they have received a ‘penalty points’ but not an actual penalty. Once a taxpayer accumulates a threshold number of points they will receive a fixed financial penalty of £200.

New penalties will also apply to those who miss their payment deadlines. Under the new regime, taxpayers who settle their liabilities within 15 days of the deadline will not receive a penalty. After this the penalty will be 2% of the due amount, rising to 4% after 30 days and will continue accruing at a daily rate of 4% until the bill is settled in full.

Points will have a lifetime of two years, after which they will expire, unless the taxpayer has reached their penalty threshold. Once the threshold has been reached, the only way points can be reset to zero is when the taxpayer has met the following two conditions:

1. A period of compliance (meeting all submission obligations for 2 years)
2. All submissions due within the preceding 2 years have been submitted, regardless if originally late.

The new system is considered by many be a fairer way of levying penalties since it penalises persistent offenders. Taxpayers can also request a time to pay arrangement from them and agree to a schedule to pay outstanding tax which will stop a penalty accruing any further from the time they approach HMRC.

  • Click here for more details on HMRC’s new penalty regime.

For help avoiding penalties and keeping your tax return submissions within deadline call Arcus on 01572 770552 or get in touch @arcusrutland.