In a new report, Tax Policy Associates (TPA) has found that between 2018 and 2022, HMRC issued almost 660,000 late-filing penalties to low-income individuals. Figures for 2020/21 show that 184,000 £100 fixed late-filing penalties were given to individuals with income below the income tax personal allowance – 40% of the total number of late-filing penalties issued by HMRC for that tax year. The picture is similar for previous years.
Until 2011, late-filing penalties were cancelled where there was no tax liability but, after the law changed, the penalty now remains even if the taxpayer has no taxable income. This has left individuals on low incomes affected by penalties when they had no tax to pay (and potentially the prospect of a discovery assessment). TPA notes that this includes vulnerable people who are facing other difficulties in their lives which may well have impacted on their ability to meet the self-assessment filing deadline, lodge an appeal or otherwise deal with what to many is a complex system.
TPA recommends that late-filing penalties should automatically be cancelled if HMRC later finds that the taxpayer has no taxable income, or penalties could simply be capped at the amount of a taxpayer’s tax liability (returning to the previous system). HMRC has said (in a Times article covering the issue) that the government plans to change the rules, removing the penalty for a first offence (but doubling it to £200 for a second), although it seems that any changes will need to be in lock-step with the introduction of Making Tax Digital for income tax self-assessment from April 2026 (but with no implementation date announced so far for taxpayers with income of £30,000 or under).
TPA questions why so many people who apparently have no tax to pay are being asked to file a return in the first place. Dan Neidle, founder of TPA, also highlights a further crucial point: if experienced business people and tax advisers are having difficulty with HMRC systems, or in eliciting a response, what chance does someone on a very low income stand?
Separately, Thompson Reuters reports that HMRC issued over 30,000 penalties for inaccuracies in tax returns in 2021/22, with some 18,500 penalties for careless errors, over 10,500 for deliberate but not concealed errors, and over 1,000 penalties for the most serious deliberate and concealed behaviour (where penalties range from 30% to 100% of the potential lost revenue).
In a new report, Tax Policy Associates (TPA) has found that between 2018 and 2022, HMRC issued almost 660,000 late-filing penalties to low-income individuals. Figures for 2020/21 show that 184,000 £100 fixed late-filing penalties were given to individuals with income below the income tax personal allowance – 40% of the total number of late-filing penalties issued by HMRC for that tax year. The picture is similar for previous years.
Until 2011, late-filing penalties were cancelled where there was no tax liability but, after the law changed, the penalty now remains even if the taxpayer has no taxable income. This has left individuals on low incomes affected by penalties when they had no tax to pay (and potentially the prospect of a discovery assessment). TPA notes that this includes vulnerable people who are facing other difficulties in their lives which may well have impacted on their ability to meet the self-assessment filing deadline, lodge an appeal or otherwise deal with what to many is a complex system.
TPA recommends that late-filing penalties should automatically be cancelled if HMRC later finds that the taxpayer has no taxable income, or penalties could simply be capped at the amount of a taxpayer’s tax liability (returning to the previous system). HMRC has said (in a Times article covering the issue) that the government plans to change the rules, removing the penalty for a first offence (but doubling it to £200 for a second), although it seems that any changes will need to be in lock-step with the introduction of Making Tax Digital for income tax self-assessment from April 2026 (but with no implementation date announced so far for taxpayers with income of £30,000 or under).
TPA questions why so many people who apparently have no tax to pay are being asked to file a return in the first place. Dan Neidle, founder of TPA, also highlights a further crucial point: if experienced business people and tax advisers are having difficulty with HMRC systems, or in eliciting a response, what chance does someone on a very low income stand?
Separately, Thompson Reuters reports that HMRC issued over 30,000 penalties for inaccuracies in tax returns in 2021/22, with some 18,500 penalties for careless errors, over 10,500 for deliberate but not concealed errors, and over 1,000 penalties for the most serious deliberate and concealed behaviour (where penalties range from 30% to 100% of the potential lost revenue).
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