Millions of people across the UK are being urged to file their tax returns promptly as HM Revenue and Customs (HMRC) announces a significant change to penalty charges. Over 12 million Britons are expected to submit a Self Assessment tax return for the 2024/25 financial year by the looming deadline of January 31.
Revised Interest Rates and Immediate Penalties
While the core penalty structure for missing the tax return deadline remains strict, HMRC has confirmed a slight reduction in the interest charged on late payments. The late payment interest rate will drop to 7.75% next month, down from the current 8%.
This change follows a cut in the Bank of England's base rate to 3.75%. HMRC's late payment interest is set by law at the base rate plus 4%. Despite this small reduction, the financial consequences of missing the deadline are severe and begin immediately.
Anyone who fails to file their return by midnight on January 31 faces an automatic £100 fine. If the return is still outstanding after three months, additional daily penalties of £10 per day can be applied, accumulating up to a maximum of £900.
The Steep Cost of Late Tax Payments
The penalties extend far beyond just filing the return late. Paying the owed tax after the deadline triggers a separate and costly series of charges. If your tax bill is paid 30 days late, HMRC will charge a penalty of 5% of the tax owed.
This escalates to a further 5% penalty if payment is six months late, and another 5% after 12 months. These percentages are applied on top of the late payment interest, which is charged from the day after the payment was due until the day it is settled in full.
HMRC stated: "The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay."
Act Now to Avoid Hefty Fines
With the January 31 cut-off point fast approaching, taxpayers are being strongly advised to complete their Self Assessment returns without delay. The combination of fixed fines, escalating percentage-based penalties, and daily charges can create a significant financial burden for those who procrastinate.
The tax year in question runs from 6 April 2024 to 5 April 2025. Individuals who need to file include the self-employed, those earning over £100,000, landlords, and anyone with complex tax affairs. Submitting your return and paying any tax due well before the deadline is the only sure way to avoid these costly HMRC penalties and the newly adjusted interest rate.
