TQOTW: Self-Assessment Penalties

Now that the self-assessment filing date of 31 January has passed once again, I would like to be able to understand and explain to clients the penalty regime that will apply if their returns have not been filed on time.

Based on recent years HMRC will potentially issue at least 1 million late filing penalties.  It is important to be ahead of the game in terms of advising clients who have failed to meet the filing obligation and to be able to address disputes with HMRC.

Finance Act 2009, Schedule 55 and Schedule 56 reformed the penalty regime for self- assessment.  There are two types of penalties that need to be considered:

  1. Late filing penalties
  2. Late payment penalties

Late filing penalties are as follows:

  • £100 penalty immediately after the due date for filing. This applies even if there is no tax to pay, and whether or not the tax has been paid by the due date;
  • daily penalties of £10 per day for returns that are more than three months late, running for a maximum of 90 days;
  • if the return is still outstanding six months after the filing date, a further penalty of 5% of tax due for the return period or £300, whichever is the greater;
  • if the return is still outstanding 12 months after the filing date, a further penalty of 5% of tax due for the return period or £300, whichever is the greater; and
  • higher penalties of 70% of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (increasing to a 100% penalty if deliberate with concealment).

Late payment penalties are as follows:

  • penalties of 5% of the amount of tax unpaid 30 days after the payment due date;
  • further penalties of 5% of any amounts of tax still unpaid at six months;
  • further penalties of 5% of any amounts of tax still unpaid at 12 months

Time to pay

HMRC can suspend late payment penalties where the taxpayer agrees a Time to Pay arrangement and the tax is paid over a period of time.

Reasonable excuse

Penalties can be avoided if the taxpayer has a ‘reasonable excuse’.  For example, if the taxpayer was suffering a serious illness which prevented him managing his affairs.

There are several other situations that HMRC may consider as a reasonable excuse:

  1. Where the deadline was not met because the taxpayer did not receive the return;
  2. Where the return was posted in good time but an unforeseen event disrupted the postal service;
  3. Where the taxpayer or agent lost his records as a result of fire, flood or theft;
  4. A close relative or domestic partner died shortly before the deadline;
  5. A close relative or domestic partner had a serious illness shortly before the deadline;
  6. Where the taxpayer is in prison.

It should be noted that there are some situations that HMRC will not accept as a reasonable excuse.  Examples of these are:

  1. The return is too difficult to complete;
  2. Pressure of work;
  3. Failure by the taxpayer’s agent (although there is a tax case that refers);
  4. Lack of information to complete;
  5. Absence of reminders from HMRC.

The onus is on the taxpayer to provide enough details to determine if the reason or reasons existed at the time of the default.

 Challenging penalties

HMRC will automatically issue the relevant penalties.  If the taxpayer and agent believe that the penalty is not due an appeal should be made, along with providing details of where they consider having a reasonable excuse.  It could be a combination of reasons.

If HMRC agrees with the appeal the penalty will be removed, however, if HMRC does not agree, it is possible to challenge HMRC’s decision and an appeal taken to the First-Tier Tribunal.  A tax return should also be submitted as soon as possible as the default must be remedied as soon as possible. Please share this article with your clients


If you have a tax query, why not contact the Tax Advice Line on 0844 892 2470 to discuss it. Our team of experts have a wealth of experience and can also provide a written consultancy service at competitive rates.

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Tax Consultant
0844 892 2470


Angela has worked in tax since 1995, working in the main in private practice as a Tax Manager where she has gained experience in all areas of accountancy and taxation, and has dealt with clients ranging from high net worth individuals to owner managed companies, sole traders and partnerships.

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