HMRC could be in line for a windfall if people don’t file their tax returns on time

by | Jan 24, 2024

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HMRC could be in line for a windfall in 2024 if people don’t file their tax returns on time, accountancy and business advisory firm BDO has warned.

While HMRC imposes a late filing penalty of £100 for people who miss the filing deadline of 31 January 2024, those who fail to file and pay their tax on time will also be charged late payment interest, with rates at their highest level for 16 years.

Late payment interest (LPI) is set at the Bank of England’s base rate plus 2.5%. This means the current rate of LPI is 7.75%. The last time the rate was higher was in January 2008.

 
 

With many more people likely to have crossed the threshold at which they are required to file a tax return, there is a risk of a significant increase in the number of people who don’t meet the 31 January deadline.

Dawn Register, Head of Tax Dispute Resolution at BDO said:

“There could be tens of thousands of people who will have been drawn into the Self Assessment tax net for the first time in the 2022-23 tax year. Many may be unaware of their obligations to file a tax return before 31 January 2024 and could run the risk of penalties.

 
 

“These new filers could include parents claiming child benefit whose salaries crossed the £50K threshold for the first time in the 2022-23 tax year and who will have to repay some or all of their benefit through the high income child benefit charge. They might be higher earners whose salaries topped £100K or pensioners who earned more than their savings allowance because of rising interest rates. Alternatively, they could be working people whose side hustle earnings were above £1,000 during the tax year.

“While many people might think that a £100 fine is a small price to pay, those who miss the deadline and pay their tax late can get a shock once they see the impact of late payment interest charges which are now at their highest level for 16 years. 

“The good news is that HMRC has made it easier for those who genuinely can’t pay on time to set up Time to Pay arrangements. Those with debts of less than £30,000 can use a self-service system to schedule a regular affordable payment plan.

 
 

“HMRC’s latest data shows that 44,800 Self Assessment filers have set up Time to Pay arrangements since April 2023. In total, there are almost 900,000 HMRC customers who are using Time to Pay arrangements to help them pay £7.8bn in tax.”

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