HMRC fines one million self-employed taxpayers – check whether you need to pay

HMRC has hit nearly one million self-employed taxpayers with a penalty for missing the tax return deadline.

The penalty applies even if there’s no tax to pay, but HMRC says it will treat those with a genuine excuse leniently.

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A record-breaking Self Assessment season

A record-breaking 11.1 million taxpayers sent their tax return by the 31 January deadline, up from 10.8 million the year before. In total, 11.8 million tax returns were due.

The Association of Independent Professionals and the Self-Employed (IPSE) attributes this record to a rise in female freelancers (especially highly skilled professionals) and the fact that “more people than ever are now doing side-hustles alongside other work”.

93.95 per cent of all returns were filed online

HMRC breaks these numbers down in more detail:

10,450,542 returns were filed online (93.95 per cent of all returns)

93.5 per cent of all returns filed were filed online last year. With this number increasing to nearly 94 per cent in 2020, it seems more people than ever are going digital.

While HMRC might welcome this small rise, it has halted its Making Tax Digital scheme for taxes other than VAT. That means we shouldn’t expect Self Assessment to go completely digital any time soon.

702,171 taxpayers filed on 31 January and the peak filing hour was 4pm to 4:59pm (when HMRC got 56,969 returns)

Our own data shows that over 1,000 people read our when is the tax return deadline article on deadline day itself.

958,296 taxpayers missed the deadline (8.18 per cent)

HMRC thanked those who submitted and paid in time for the deadline, but mentioned those who are yet to file should act urgently to avoid further fines.

£100 penalty for those who missed the deadline

The £100 penalty applies even if you don’t have any tax to pay, or if you’ve paid the tax but not submitted a return.

Angela MacDonald, HMRC’s Director General for Customer Services, said: “Customers who have missed the deadline should contact HMRC. The department will treat those with genuine excuses leniently, as it focuses penalties on those who persistently fail to complete their tax returns and deliberate tax evaders. The excuse must be genuine and HMRC may ask for evidence.”

What are HMRC’s penalties?

Late filing penalties increase as time goes on. After three months, HMRC may charge daily penalties of £10 a day, up to a maximum of £900.

After six months, you could get a further penalty of five per cent of the tax due or £300 (whichever is greater). This same penalty is applied if you still haven’t filed your return after 12 months.

If your payment itself is still outstanding, you could get penalties of five per cent of the unpaid bill at 30 days, six months and 12 months.

Read more about late payment penalties and reasonable excuses.

Have you ever been hit with a late penalty by HMRC? Let us know in the comments below.