You thought 31 January tax return deadline was bad? You ain't seen nothing yet.
You know how it is. No-one likes doing their tax return, and in the wholesome spirit of procrastination, many thousands of people put off doing the return until the last minute and an estimated 900,000 will have missed the deadline entirely.
The thing is, if you don’t actually owe any tax, which is becoming an increasingly popular trend given the state of the economy, that pesky £100 penalty gets reduced down to what you do owe, and can be reduced down to zero. Great news for your pocket, less pleasing to Treasury coffers.
Unfortunately, HMRC noticed that this was having a detrimental effect on incentivising people to complete their tax return- after all, if there’s no penalty, there’s no rush, right? As a result, in 2009 the Government announced new rules on tax return penalties, which will take effect from next year’s 2010/11 returns. The one due by 31 January 2012 at the latest.
The bad news
If you are one of those lackadaisical taxpayers who never quite gets round to filing their tax return, you had better take notice. Because the new rules are quite harsh.
First of all the rule about reducing the penalty to the amount of tax due has disappeared. This means that now, the £100 penalty if you don’t get your return in by 31 January (or a paper return by 31 October) is exactly £100. Every time.
If you are three months late, you will now face an automatic £10 a day penalty after 90 days. Six months brings a massive £300 or 5% of tax liability penalty (whichever is higher),going up to a massive 100% of tax due penalty if the return remains outstanding 12 months late and you are deliberately preventing HMRC from being able to assess your liability.
So, if it isn’t enough that April 2011 sees hikes in National Insurance, lowering of the 40% tax threshold and predicted raging inflation, the tax man wants to shake more out of the poor suffering populace in tax penalties it can’t afford. Thanks mate.