For many years, the fine for sending your Self Assessment Tax Return in late has been £100, with a second penalty of £100 if you then failed to get it in within six months of the deadline. However, the fines would be reduced if the tax due was less than £100. If no tax was payable, the penalty would be cancelled entirely.
For the year ended 5 April 2011 (for which the deadline for submission is the end of this month) the rules have changed. They are now:
- £100 if you're late.
- After three months, a further penalty of £10 per day, for the next 90 days.
- After six months, another fine of £300 - or 5% of the tax due, if higher.
- After twelve months, a further £300, or 5% of the tax due.
Crucially, these fines are no longer reduced or eliminated if there's little or no tax due. Historically, many people have not bothered too much about the 31 January deadline - knowing they've no tax to pay, they've submitted the return later with no real consequences. Or they've seen £100 as a reasonable price to pay for being able to submit their return many months late. If they take the same approach this year, they could find themselves with a substantial bill.
At the moment there's no indication that HMRC will exercise any discretion about charging these penalties, though it seems likely that before long some taxpayers will challenge what could be seen as disproportionate fines when compared to a negligible tax bill. But you'd be well advised to get your return done this month to make sure you're not one of those test cases.