- Almost 1.4 million people were hit with interest on late payments for self-assessment and 280,000 people were fined for filing late in 2021/22
- HMRC raked in £188 million in fines and interest in 2021/22 – and that is set to rise
- On average taxpayers are likely to pay over £500 in penalties for filing their tax return late
- Frozen or reduced tax thresholds mean the number of people caught in the self-assessment web is likely to increase over the next few years
- Deadline for payments on account is midnight on 31 July
A Freedom of Information request submitted by AJ Bell has revealed that just under 1.6 million taxpayers have been hit with fines or penalties for their self-assessment tax return in the 2021/22 financial year. It illustrates the challenges faced by taxpayers navigating the UK’s complex tax system and provides a reminder of the importance of hitting self-assessment deadlines, with the 31 July deadline for payments on account fast approaching.
According to the latest figures available, 1.4 million taxpayers were charged interest for paying their tax bills late and a further 280,000 people paid penalties for filing their return late. Some paid both, with 90,000 taxpayers hit with late filing penalties and interest.
Around £188 million has been paid to HMRC in fines and interest so far, with the average late filing penalty standing at £350.
However, these figures are likely to be revised upwards, similar to previous years* – based on revisions for 2019/20 and 2020/21, we could see the average penalty once again exceed £500 in 2021/22.
On the face of it, it looks like the numbers have dropped from the previous year, but the figures only count taxpayers once the interest accrued or late filing penalty have been paid – meaning the figures for the 2021/22 tax year will ultimately be significantly higher than they are now.
Currently on average taxpayers are paying £350 in fines each for late filing, but if this rises in line with previous years it will hit over £500 per person. The penalties start at £100 if paid within the first three months, which suggests many will be taking considerably longer and paying considerably more than that when reconciling their late tax bill.
With the UK’s tax system becoming increasingly complicated as the government’s pincer-move of frozen thresholds alongside cuts to capital gains tax and dividend allowances flanks many more taxpayers, it’s likely we will see HMRC’s self-assessment web continue to rake in money through interest and fines in 2023 and 2024.
*These figures, including any subsequent revisions, are calculated only once the interest accrued or late filing penalty has been paid. The latest numbers available go up to the tax year ending April 2022, meaning taxpayers would have been due to pay any penalties by January 2023.
Late filing penalties on income tax self-assessment
Source: AJ Bell Freedom of Information request from HMRC. *These figures, including any subsequent revisions, are calculated only once the interest accrued or late filing penalty has been paid. It is therefore likely that the figures for 2021/22 will eventually be revised upwards.
Late interest payments on income tax self-assessment
Source: AJ Bell Freedom of Information request from HMRC. *These figures, including any subsequent revisions, are calculated only once the interest accrued or late filing penalty has been paid. It is therefore likely that the figures for 2021/22 will eventually be revised upwards.
Both late filing penalties and interest on income tax self-assessment
Source: AJ Bell Freedom of Information request from HMRC. *These figures, including any subsequent revisions, are calculated only once the interest accrued or late filing penalty has been paid. It is therefore likely that the figures for 2021/22 will eventually be revised upwards.
Laura Suter, director of personal finance at AJ Bell, comments:
“With the deadline for payments on account for self-assessment tax bills now only a day away, the steady rise in the number of people paying self-assessment is set to be laid bare. Anyone who makes payments on account for their self-assessment tax bill, or who wishes to make an advance payment, has until midnight on 31 July to cough up the money or risk drifting closer towards a hefty penalty on top of what they already owe. Anyone hit with interest on their tax bill will find it has shot up, as it’s based on Base Rate plus 2.5% – meaning it is now 7.75%. This has risen from 2.6% at the start of 2022, resulting in a more punitive system that rakes in even more money for the government from taxpayers.
“As the government drags more people into paying tax via self-assessment, we’ll see more and more taxpayers hit by these penalties. With the tax-free allowance on capital gains and dividend taxes being dramatically cut in the past two years, more people will have to file a tax return for the first time in their lives. Clearly some people are going to struggle to complete the return, or may not even realise they have to file one in the first place. You only have to look at the number of people calling HMRC and the volume of those that go unanswered to see the struggles that lots of taxpayers have.
“Taxpayers can get their fees and charges waived, but only if they meet a certain list of excuses from the taxman. Simply not knowing that you needed to file a return or not understanding how to are not enough, you only get a refund if you have things like illness or a relative’s death that prevented you from filing, or your computer breaking when you were sending your return.
“One way to avoid late filing is to set regular calendar reminders to prompt you to file on time – and giving you sufficient time to gather the required information and prepare the return. Another alternative is to outsource it to a professional. It’s very possible to file a return yourself, especially if it’s just to report an investment gain, for example, but you might decide that delegating it to an accountant or tax specialist is worth the cost.”
How late filing fees work:
You’ll get a penalty if you need to send a tax return and you miss the deadline for submitting it or paying your bill. You’ll pay a late filing penalty of £100 if your tax return is up to three months late, but you’ll have to pay more if it’s later, or if you pay your tax bill late. You’ll also be charged interest on late payments. You pay Base Rate plus 2.5% in late payment interest, meaning the current interest charge is 7.75% from 20 June 2024.
