Don’t delay submitting your tax return this year. The penalties for late filing are rocketing skyward at an alarming rate. Now you will be hit with a penalty even if you have paid all your tax.
Since the introduction of self-assessment it has been clear to HM Revenue & Customs
that the late filing penalty regime is insufficient incentive for all taxpayers because it is still the case that over 10% of tax returns are not filed by the due date.
New late filing penalties have been introduced for the 2010/11 tax returns and they are Draconian.
• Under these new rules the usual £100 late filing penalty will apply for tax returns that are up to 3 months late.
• In a new attempt to discourage late filing, for each subsequent day the taxpayer will be charged £10 per day for a maximum of 90 days. That is a total of £900.
• If the outstanding return is still not submitted by 31 July 2012 a further £300 penalty (or 5% of any tax due for 2010/11 whichever is the greater) will be charged.
To grasp the full extent of the changes, it is probably best to compare the position under the old rules and the new ones.
If a taxpayer who had paid all his tax submitted his 2009/10 tax return after 31 July 2011, he would have faced no fine whatsoever. Although HMRC would have levied 2 x £100 penalties those would have been reduced to nil on eventual submission of the return because he had no further tax to pay.
Under the new regime the same taxpayer with no tax to pay who submits his 2010/11 tax return after 31 July 2012 will be charged a massive £1,300.
Many taxpayers do not realise that penalties will now be charged even where all tax due has been paid and this is the major difference with the new, much harsher, late filing penalty system.
If you haven’t already started collating the information for your 2010/11 you should start to do so now in plenty of time before the 31 January electronic filing deadline. If you are filing your tax return on paper you only have until October 31 to submit your form. Tempus fugit!