The payment deadline for self-assessment tax is due on 31 January. Any unpaid amount is subject to interest charges and penalties. There’s still time to avoid unnecessary payments!
Rising interest rates during 2023 impacted interest rates charged by HMRC. This potentially presents taxpayers with an even higher debt to HMRC than envisaged.
‘Late payers should know that they face financial penalties from HMRC,’ explains Felicity Reader, Accounts Senior and tax expert at re:accounts Chartered Accountants in Stevenage. ‘The rise in interest rates means any outstanding amounts incur interest penalties of 7.75%.’
HMRC’s current interest rate is the highest level for more than 20 years. It’s a steep and scary climb from the rate of 2.75% just two years ago in January 2022.
Taxpayers should know that additional late payment penalties are charged alongside interest on the amount due. This involves a 5% penalty if the 2022-23 balancing payment is not paid within 30 days of the due date. An additional 5% penalty is charged if the tax remains outstanding after six months and 12 months.
And there’s more! If your self assessment tax return is filed after midnight on 31 January, you are charged a penalty of £100. After three months, your outstanding return incurs a daily penalty of £10. The maximum fine is £900. Further penalties apply after six months and twelve months of a missing submission.
‘To avoid financial penalties and interest charges, you need to either ensure your return and payments reach HMRC on time or make an estimated payment to HMRC by 31 January,’ advises Felicity. ‘Tax return amendments can be made up to 12 months from 31 January 2024. If you have underpaid, some interest charges are incurred; however, you can save money by acting fast! Any changes that reduce your tax liability could involve a refund.’
Would you like to avoid the time and stress involved with completing your tax return?
Would you like to know that you have a minimal tax liability that’s correct and compliant?