Over 11.5 million taxpayers met the self-assessment deadline last Friday, according to figures released by HMRC.
But an estimated 1.1 million failed to file in time, which could mean £110 million in late filing revenue alone. Barclays customers could have reasonable excuse for late tax payments thanks to systems outages.
AJ Bell pensions and savings expert, Charlene Young, comments: “The numbers show that the perfect storm of rising interest rates, reduced allowances and frozen tax thresholds in 2023-24 continued to whisk people into the tax return trap.
“A whopping 732,498 people filed on 31 January itself, including over 31,000 in the final hour before the deadline. Overall numbers were broadly in line with 2022-23 (which was a record-breaking year), even with one key earnings threshold relaxed this time around.
“Anyone who earnt over £150,000 for the year should have filed. This earners trigger was one threshold that increased (up from the £100,000 for the previous year), but the starting point for additional rate tax (45%) was also slashed from £150,000 to £125,140 in April 2023, meaning those people who escaped having to automatically do a return would’ve still paid more in tax last year.”
Late filing fines
“HMRC estimates that 1.1 million people failed to file by the deadline risking £100 late filing penalties, a potential windfall for the tax man of £110 million. Many people would have failed to realise they need to file an assessment at all and the £100 late fee applies even if there is no tax to pay.
“Along with the late penalty, daily interest will start to accrue based on an annual rate of 7.25% on any tax owed. Anything for 2023-24 still left unpaid by 1 March could suffer an extra 5% penalty charge. These percentage charges apply to unpaid tax due last year, not payments on account due for the coming year.
“After Barclays suffered a systems-wide outage on Friday 31 January, some taxpayers who held on to their cash until the last minute or were waiting for payday could have found they were unable to send money. HMRC is said to be working with Barclays and reassured those genuinely affected will be able to appeal any late payment fines through the usual channels.
“If you don’t have an excuse to appeal a fine but still owe money, get in touch with HMRC as soon as you can as you might still be able to set up a payment plan to get back on track.
“If you’re up to date with HMRC and already thinking about tax to pay for 2024-25, you can apply for a budgeting plan to help pay regularly towards your bill, or if you make payments on account you can request to reduce them if your earnings are likely to be significantly lower than before.”
Child benefit changes yet to feed through
“The increases to child benefit thresholds didn’t come in until April 2024, so many people will still have been caught by the child benefit ‘high income’ charge for 2023-24. This is where they must repay some or all of the child benefit they received where their adjusted net income was over £50,000 for the year. The £50,000 threshold had previously been frozen since its introduction in 2013.
“Whilst tax on interest and the child benefit tax charge can sometimes be reclaimed through people’s tax codes, many will have had to file self-assessment tax returns.”
Cuts to investment allowances
“Further reductions in tax free allowances have clearly started to bite. The CGT allowance was more than halved from £12,300 to £6,000, and has stood at just £3,000 since 6 April 2024, less than 25% of what it was just two years before.
“More individuals and trusts will have had to declare and pay capital gains tax for the first time, something that is forecast to continue as the allowance bottoms out.
“The dividend allowance was £1,000 for the 2023-24 tax year, down from £2,000 for the year before. The automatic trigger for people to file based on income from savings and investments was £10,000, but smaller shareholders will start to face bigger bills, a trend that will continue next year as the 2024-25 dividend threshold is just £500.”
