A brief guide to Self-Assessment penalties

Posted on: November 27th, 2012

The penalties and deadlines in this article are only applicable to UK freelancers.

As Christmas draws ever closer, so too does the final deadline for self-assessment. With this can come stress, worry and financial penalties if you file late. Conversely, if given apt time and attention, you can sail through the next couple of months keeping your tax concerns to a minimum.

Now, in case you didn’t know, the deadline for paper returns has already passed. Don’t despair just yet though, as an online tax return can still be submitted right up until January 31st. Plenty of time then.

Miss that, however, and the HMRC can unleash their wrath – a multitude of fines landing on the disorganised or lax freelancer’s doorstep. To make matters more complex, the HMRC recently altered the way in which tax penalties are administered. Therefore even if you thought you were up to speed on their legislative powers, you may well not be.

With that in mind, here’s an overview of just what the HMRC can do if tax does in fact prove too taxing…

A £100 fine straight off the bat
Essentially an on the spot fine. Fail to file before the midnight, January 31st deadline and you’ll immediately find yourself owing the HMRC an extra £100.

Additional fines of £10 per day after three months
Delay your return further and the penalties increase accordingly. Fail to submit your Self-Assessment for another three months and you’ll start to accrue additional fines of £10 per day for up to 90 days.

Still not made your return? Then it’s a further penalty of £300 or 5% of the tax owed
Should the HMRC still be waiting for your return after six months, then you’ll be subject to a further penalty of £300 or 5% of the tax owed – whichever amount is greater. You’ll be hit with the same penalty again after twelve months if they’re still waiting.

Doing the maths, this collection of fines means that if you’re 12 months late submitting your Self-Assessment, you’ll owe HMRC at least £1,600 in penalties on top of your tax bill. A pretty needless fine easily avoided with a bit of organisation and ample time spent sifting through your finances.

That said, to the uninitiated that deadline can sneak up pretty quickly, the whole process proving time-consuming and confusing. If you’re seeking a helping hand, feel free to peruse our step by step guide to self-assessment at Freelance Advisor.

What are you waiting for, get self-assessing!

Mark James is an in-house writer for online accountants, Crunch, and a regular contributor to Freelance Advisor. Outside work, he’s a huge football fan and the proud owner of Brighton and Hove Albion season ticket.

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