No one likes the idea of getting a penalty from HMRC.

I have explained below the most common penalties and how to avoid them.

Self Assessment returns need to be filed by anyone whom HMRC has sent a notice to, generally:

~ company directors
~ self employed / partners in a partnership
~ people with untaxed income, eg rents
~ some Higher Rate tax payers

Returns are due by 31 January after the tax year if filed electronically, or 31 October if filed by paper (I file all returns electronically, so January is the relevant date)

Late returns:

~ 1 day late – £100 penalty.
~ 3 months late – a daily penalty of £10 a day, for a maximum of 90 days (£900).
~ 6 months late – a further penalty of 5% of the tax due or £300, whichever is greater.
~ 12 months late – a further penalty of 5% of the tax due or £300, whichever is greater.

Late payments: There are two aspects to this – first interest at HMRC normal rates, secondly default penalties:

~ 30 days late – 5% of the tax you owe at that date
~ 6 months late –  a further penalty of 5% of the tax
you owe at that date
~ 12 months late – a further penalty of 5% of the tax
you owe at that date

Errors, inaccuracies and mistakes – including not registering for Self Assessment on time – HMRC charge a sliding range of penalties which vary according to nature of the error and disclosure (unprompted, i.e. you disclose if before it is fund by HMRC, or prompted, i.e. HMRC find it or announce they are carrying out an investigation):

~ careless error – penalty between 0% and 30% if unprompted disclosure, 15% to 30% if prompted disclosure
~ deliberate error – penalty between 20% and 70% if unprompted disclosure, 35% to 70% if prompted disclosure
~ deliberate and concealed – penalty between 30% and 100% if unprompted disclosure, 50% to 100% if prompted disclosure

Avoiding penalties – key issues are:

~ letting me have your Self Assessment paperwork on time, including business accounts
~ making sure you give me compete and accurate information
~ approving your return quickly once I send it to you – I can’t submit it until you do so
~ paying your tax on time, and setting aside money for this