HMRC’s most common penalties and what you can do now to protect yourself | Personal Finance | Finance

. Avatar

[ad_1]

Dealing with the HM Revenue & Customs (HMRC) can be very tricky which is why it’s important to stay informed about the most common fines to avoid unnecessary financial burdens due to non-compliance or errors.

Finance expert, John Clemming from For Kredit has provided his insight into the penalties imposed by the HMRC and some practical advice on how to avoid them.

Filing Your Tax Return Late

One of the most straightforward fines from HMRC comes from failing to file your tax return on time. The deadlines are usually clear—January 31 for online returns and October 31 for paper returns concerning the previous tax year.

If you miss this deadline, you immediately incur a £100 fine. If the return is over three months late, additional charges can accrue at £10 per day, up to a 90-day maximum of £900.

Paying Your Tax Late

Similarly, failing to pay the tax you owe by the due date leads to penalties. Late payment incurs an initial 5 percent of the owed taxes if 30 days late, another 5 percent if 6 months late, and an additional 5 percent if 12 months late. These can substantially increase the amount you owe, so it’s essential to plan your finances accordingly.

Inaccuracy Penalties

HMRC imposes fines for errors on tax returns or documents that understate your tax liability. These penalties depend on whether HMRC views the inaccuracies as careless, deliberate, or deliberate and concealed. The fines can range from 0 percent up to 100 percent of the unpaid taxes for serious cases, highlighting the importance of accurate and honest reporting.

Failure to Notify

If your tax status changes and you do not inform HMRC, you may face a ‘failure to notify’ penalty. This situation typically arises when individuals or businesses need to register for VAT or self-assessment but fail to do so on time. The penalties are calculated similarly to inaccuracies and can be as severe, depending on the amount of tax owed and how long the failure has continued.

VAT-Related Penalties

For businesses, VAT (Value Added Tax) errors can lead to significant penalties, especially when the business fails to register for VAT upon reaching the threshold, currently set at £90,000 of taxable turnover in a rolling 12-month period. Errors in VAT returns or late submissions can also trigger fines. The percentage of the penalty depends on the type of error—whether it is due to careless or deliberate misreporting.

Offshore Penalties

The penalties for failing to declare income or gains from offshore financial interests are particularly severe, given the efforts by authorities worldwide to clamp down on tax evasion. These penalties can be up to 200 percent of the unpaid liabilities depending on the territory in which the assets are held and the behavior that led to the underreporting.

John Clemming, finance advisor from For Kredit said: “Understanding and respecting HMRC‘s requirements can save you a significant amount of time and money.

Here are some tips to avoid these common penalties:

Stay Organised: Keep your financial records in order throughout the year.

Be Proactive: Always assume you have to file a return or declare income unless certain you don’t need to.

Use Reminders: Leverage technology to remind you of important tax dates and deadlines.

Seek Professional Help: If in doubt, consult a tax professional who can offer tailored advice and ensure compliance.

HMRC’s fines can be challenging, but with a proactive approach and thorough understanding, you can avoid these common pitfalls and ensure that your tax affairs are in order without undue stress or financial penalty.”

[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *