Nearly 750,000 taxpayers failed to meet the January 31 deadline for filing self-assessment returns this year and most will face a penalty of at least £100. But as Her Majesty’s Customs and Revenue (HMRC) turns its attention to tackling serious tax avoidance, the penalty system is set for an overhaul that should benefit those who just occasionally submit late returns.
Around 11 million Britons are required to complete and submit self-assessment tax returns every year. And it’s not just the self-employed who are affected. If you rent out property, have made gains from the sale of shares, receive dividend income or profit from the sale of a second property, the taxman will want to know. And in some cases, even those who receive child benefit may have to complete the dreaded Self Assessment form.
And by and large, Britons manage their tax affairs pretty well. According to the latest figures from HMRC, 10.7 million taxpayers succeeded in filing self-assessment returns ahead of midnight on January 31 – a collective achievement that was welcomed by Angela MacDonald, Director General for Customer Services.
“It’s really fantastic to see that each year, more and more Self Assessment customers are getting ahead of the game and submitting their tax return before the 31 January deadline, “ she said.
A Race to the Finish Line
But for many, it was a last minute race to the finishing line. A total of 758,707 waited until the very last day before completing the self-assessment process and between 4.00pm and 5.00pm, HMRC was processing 60,000 claims a minute.
Meanwhile, a small but significant minority didn’t make the cut. A total of 745,588 missed the deadline, a failure that has traditionally triggered an automatic and immediate £100 penalty and perhaps also further fines if a ‘late’ return is not subsequently submitted within a few months. Needless to say, HMRC is encouraging laggards to remedial action as quickly as possible.
“If you’re one of the small number that missed the deadline, please submit your return now to avoid further penalties. We really don’t want penalties, we just want tax returns,” added Angela Jackson.
The Penalty Escalator
For those who not only miss the January 31st deadline but also let the process drag out, the penalties can be draconian. After three months, anyone who has not submitted a return may be fined to the tune of £10 a day up to a maximum of £900. And it doesn’t stop there. Further penalties of £300 can be imposed after six months and a year have elapsed.
It has to be said that those penalties apply to the extreme end of the non-submission spectrum. Most late filers will face a penalty of just £100 and in the future, anyone found guilty of minor transgressions can look forward to escaping a financial hit.
A Points Based System
Under Treasury Plans published as part of the 2017 Autumn Budget, the government signalled its intention to introduce a points-based system for late filers. Operating along the lines of driving licence penalty points, the proposed changes are intended to prevent an undue financial burden falling on taxpayers who usually complete all the paperwork on time but perhaps miss a deadline once or twice.
The model preferred by HMRC would see a penalty point being assigned every time a deadline is missed, with charges imposed above a certain threshold. Under current proposals, taxpayers who submit a return once a year can expect that threshold to be set at two points, while those who are required to file quarterly would trigger a charge at 4 points. And as is the case with driving penalties, a time limit would be put on the points, meaning that taxpayers who comply with the rules over a sustained period have their accounts returned to zero.
The legislation is expected this year, and the current system will remain in place for two or three years at least as the new regime will not come into force until 2020 at the earliest.
In the meantime, HMRC is anxious to reduce the incidence of late payment to the barest of bare minimums. “But we’re not complacent,” said Angela MacDonald.
“We want the number missing the deadline to be zero, and we’ll continue to adapt the process to make it easier and simpler for all our customers until every return is in on time and without avoidable errors.”
To that end, HMRC this year stepped up its efforts to provide telephone support for self-assessment taxpayers – and particularly those who were struggling to complete the complex task of filing a document that is packed from beginning to end with unfamiliar terminology.
On deadline day, HMRC’s tax system handled 195,260 calls while managing to keep waiting times down to just over three minutes. As the tax authorities see it, the availability of an accessible and relatively efficient helpline meant that “hundreds of thousands of people” hit the deadline
Of course, the safest way to ensure that January 31 represents just another date in the calendar – rather than the last minute rush to collate figures from multiple sources and grapple with an online form – is to start the process early. This year’s deadline related to tax affairs from running from April 2016/2017, meaning that many taxpayers could have started the process of filing their returns in the Spring or Summer of last year.
Human nature being what it is, however, many of us will always opt to put off today what can be done tomorrow and the chances are there will always be a last minute rush to get across the Self-Assessment finish line. The good news is, that the penalties for failing to do so are set to be less harsh in the future.