The Self Assessment system comes with a range of fines and penalties that start to kick in the moment you miss a deadline or don’t stick to the rules. For example, if you miss the main deadline of the 31st of January for filing your tax return and paying up what you owe, you’ll be hit with an automatic £100 fine. If you keep HMRC waiting after that, things just keep getting worse:
- Missing the filing/payment deadline on the 31st of January: £100.
- Leaving it for another 3 months: £10 per day, up to £900.
- Still haven't done it after 6 months: £300 or 5% of what you owe (whichever's worse).
- A year past the deadline without sorting it out: another £300 or 5% of the tax owed.
Even if you get your Self Assessment paperwork in on time, things can still get bad if your numbers don’t add up. Making a mistake in a tax return can be painful when the taxman catches on. Deliberately lying in a Self Assessment form is even worse. If you’ve just made an honest mistake, there’s a chance you’ll be able to fix the problem before the penalties start rolling in. You have to do it within 12 months of the deadline, though. If you do your taxes online, this can be as simple as logging in and correcting the error. If you file on paper, though, it can get a little more complicated. You've got to download another copy of the Self Assessment form and send in the pages you've changed. The main thing is to be honest and up-front as soon as you realise there’s a problem in your paperwork. If the taxman thinks you’ve deliberately understated your income, over-claimed for business expenses or even just been careless with your bookkeeping, things can get bad very quickly.
That said, HMRC does understand that life can sometimes get in the way of your Self Assessment homework. If you’ve got a reasonable excuse for missing a deadline or giving incorrect information, for instance, you might be able to limit or avoid the damage. What’s a reasonable excuse in the taxman’s eyes? Well, it’s a short list, but here are a few examples:
- HMRC itself made a mistake and either gave you bad advice or never even told you that you were supposed to file Self Assessment tax returns.
- You were hit by serious illness or other critical personal circumstances.
- A technical error you had no control over or knowledge about messed up your filing.
- Your tax return got tangled up in postal delays or bank errors.
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