HMRC are introducing a new penalty system in the new tax year. This system will be points based, making it more fair to those who make a rare mistake and more harsh on repeat offenders.

If your Income Tax Self Assessment (ITSA) and business and property income is over £10,000 per annum, the new system comes into effect from 6 April 2023. The new system will be effective from 6 April 2024 for all other ITSA submissions.

New HMRC Late Payment Penalties for 2022

There will be a two week grace period in which there will be no penalties. There is a cut off from the end of the grace period at which time penalties will start to apply. The penalties will be in increasing amounts:

  • 2 per cent penalty of money owed if the late payment is made between 16 and 30 days after the due date.
  • 4 per cent penalty of money owed if payment has not been made after 30 days.
  • A second penalty of an additional 4 per cent per year, calculated on a daily basis of total money owing will be incurred from day 31.

Taxpayers should approach HMRC directly to agree on a Time to Pay Arrangement if they are struggling to pay their tax.

Late submissions

Points will be issued for late payments as follows:

  • Each submission obligation has its own separate points threshold, depending on the frequency of tax returns, as follows:
  • Annual submissions: two-point threshold
  • Quarterly submissions: four-point threshold
  • Monthly submissions: five-point threshold.
  • One point is accrued following a late submission.
  • Failure to meet one obligation but submitting on time for others will only accrue one point corresponding to the late or missed submission.
  • Once the points threshold of a submission obligation has been reached, a capped fine of £200 will be payable.
  • Further missed submission deadlines after a penalty fine has been issued will result in further penalties.
  • Penalty points will expire after two years, providing the account remains under the point threshold and current submission deadlines have been met.
  • If the points threshold has been reached, points will only be reset once all deadlines have been met for a particular time period:
  • Two years for annual submissions
  • 12 months for quarterly submissions
  • Six months for monthly submissions.
  • In addition, taxpayers will need to submit everything outstanding over the previous two years.

You can find more great information like this on the AAT website. We will continue reporting on changes to the penalty system and other updates from HMRC as we learn them. Follow us on Facebook, Twitter or LinkedIn to follow these updates.

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