Taxpayers are being warned to pay any tax due by the 31 January deadline as HMRC interest rates hit their highest rate for more than 20 years

The interest for not paying self assessment tax on time has been charged at 7.75% since last  August and penalties accumulate for late payment.

The self assessment tax deadline is rapidly approaching and if any outstanding assessments are not paid by 31 January charges can quickly mount up, warn accountants at Blick Rothenburg.

Through 2023 the late payment charge increased from 6% on 6 January to a high of 7.75% on 22 August 2023.

In April 2020 the late payment interest rate was just 2.60% then went up to 2.75% in January 2022 when the Bank of England raised the base rate. There were a further eight increases in 2022 to 5.50%.

January 2023 saw a further increase to 6%, with five increases last year to the current high of 7.75%. This is the highest rate since it was 7.5% in May 2001.

Stefanie Tremain, tax partner at Blick Rothenberg said: ‘If any tax due by 31 January 2024 is not paid in time, HMRC will charge interest. Currently at a rate of 7.75% per annum, from the due date to the date of payment.

‘In addition, a 5% penalty will be charged if the 2022-23 balancing payment is not paid within 30 days of the due date, with an additional 5% penalty charged if the tax remains outstanding after six months and 12 months.’

Tremain advised that taxpayers should ‘consider making an estimated payment’ to avoid additional charges, even if it is not exactly correct at the time.

Filing a return after midnight on 31 January will result in a penalty of £100, then after three months a £10 a day penalty kicks in until the payment is made. This can go up to a maximum of £900.

Tremain said: ‘If your tax return remains outstanding after six months, a tax geared penalty will be charged at the rate of £300, or 5% of your overall tax liability if that is higher.

‘If your return is over 12 months late, another £300 (or 5% of the overall tax liability if greater) penalty will be charged.’ 

However, there are some excuses HMRC consider to be reasonable for filing late. These include a relative passing away close to the deadline, you were in hospital or had a life-threatening illness, your computer broke, HMRC services were down and lastly, a fire, theft or flood stopped you from being able to complete the return.

Amendments to a tax return can be made to a tax return up to 12 months from 31 January 2024, although you will be charged interest if it was underpaid.

Tremain said: ‘You could, however, amend your return if you realise you have missed a relief you are entitled to, such as relief for Gift Aid donations or pension contributions, which means you may be due a tax refund.’

A Time to Pay arrangement can be set up if individuals are struggling to pay their bills but ‘such arrangements are specific to each taxpayer and will depend on your own individual position as to whether HMRC agree to a Time to Pay and, if they do agree, what the terms will be,’ Tremain added.

One in four taxpayers still have to file their annual tax return or face a £100 penalty with only one week to go until the self assessment deadline

HMRC has warned that 3.8m people still have to file their tax return by 31 January, up on last year’s figure of 3.4m at the same date. An estimated 12.1m taxpayers have to file under self assessment rules, and so far 8.3m have filed online for the 2022-23 tax year.

It is important to file by the deadline or face an automatic £100 penalty, which was paid by an estimated 2.7m taxpayers last year.

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 £50,000 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 £100,000 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.’

Due to pressure on HMRC phone lines, the availability of call agents has been reduced and only complex enquiries will be dealt with over the phone. All other enquiries will be directed to HMRC’s online services.

Myrtle Lloyd, HMRC’s director general for customer services, said: ‘If you are a self assessment taxpayer, now is the time to take action and get your return done. People can familiarise themselves with the process by checking out HMRC’s online resources on gov.uk.’

For anyone unable to pay outstanding tax in full, it is possible to set up a time to pay arrangement online, without speaking to HMRC, if less than £30,000 is owed.

When completing a return, it is important to ensure bank account details are included, so that if HMRC needs to make a repayment, they can do so quickly and securely without needing to issue a cheque.

The penalties for late tax returns are:

•            an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;

•            after three months, additional daily penalties of £10 per day, up to a maximum of £900;

•            after six months, a further penalty of 5% of the tax due or £300, whichever is greater;

•            after 12 months, another 5% or £300 charge, whichever is greater.

HMRC will consider a taxpayer’s reasons for not being able to meet the deadline. Those who provide a reasonable excuse may avoid a penalty.

There are also additional penalties for paying outstanding tax late. These are 5% of that unpaid at 30 days, six months and 12 months. Interest will also be charged on any tax paid late.

It is important to let HMRC know of any changes to personal details or circumstances, such as a new address or name, or if you have stopped being self-employed or your business has closed.

Anyone who thinks they no longer need to complete a self assessment tax return for the 2022 to 2023 tax year, should tell HMRC – so that they can issue a withdrawal notice – before the deadline on 31 January 2024 to avoid any penalties.

Customers need to be aware of the risk of falling victim to scams and should never share their HMRC login details with anyone, including a tax agent, if they have one.

Self assessment taxpayers should guard against being targeted by fraudsters as more than 10,000 websites attempt to defraud individuals, warns HMRC

In the 12 months to August 2022, HMRC responded to more than 180,000 referrals of suspicious contact from the public, of which almost 81,000 were scams offering fake tax rebates.

They have also responded to 55,386 reports of phone scams in total, 87% down on the previous year. In April 2020 HMRC received reports of only 425 phone scams. In August 2022 this was 5,913, while it received reports of 10,565 malicious web pages for takedown.

Criminals claiming to be from HMRC have targeted individuals by email, text and phone with their communications ranging from offering bogus tax rebates to threatening arrest for tax evasion. Contacts like these should sound alarm bells – HMRC would never call threatening arrest.

Anyone contacted by someone claiming to be from HMRC in a way that arouses suspicion is advised to check the scams advice on gov.uk.

Taxpayers can report any suspicious activity to HMRC by forwarding suspicious texts claiming to be from HMRC to 60599 and emails to phishing@hmrc.gov.uk. Any tax scam phone calls can be reported to HMRC using the online form on gov.uk.

Myrtle Lloyd, HMRC’s director general for customer services, said: ‘Never let yourself be rushed. If someone contacts you saying they’re from HMRC, wanting you to urgently transfer money or give personal information, be on your guard.

‘HMRC will never ring up threatening arrest. Only criminals do that.

‘Tax scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a rebate. Contacts like these should set alarm bells ringing, so take your time and check ‘HMRC scams advice’ on gov.uk.’

Fraudsters target taxpayers when they know they are more likely to be in contact with HMRC, which is why anyone completing self assessment tax returns should be extra vigilant to this activity. There is a risk they could be taken in by scam texts, emails or calls either offering a ‘refund’ or demanding unpaid tax, thinking that they are genuine HMRC communications referring to their self assessment return.

HMRC warned that some taxpayers who have not done a self assessment return before might be tricked into clicking on links in these emails or texts and revealing personal or financial information to criminals.

The deadline for filing paper tax returns for the 2021-22 tax year is 31 October 2022, and 31 January 2023 for those filing their tax return online. Taxpayers who file their return online via gov.uk should not share their HMRC login details. Someone using the details could steal from the taxpayer or make a fraudulent claim in their name.

HMRC is actively tackling the scams and fraudsters who attempt to mimic genuine HMRC activity and messages. The department’s dedicated customer protection team works continuously to identify and close down scams.

HMRC also tackles misleading websites designed to make people pay for services that should be free or low cost, charging to connect people to free HMRC phone helplines. To protect the public, HMRC formally disputes and takes ownership of HMRC-branded internet domain or website names. Since 2017, the department has recovered more than 183 websites hosting low-value services such as call-connection sites, saving the public millions of pounds.

Over the last year the tax authority has also worked with the telecoms industry and Ofcom to remove 48 phone numbers being used to commit HMRC-related phone scams.

HMRC is warning self assessment taxpayers to be on their guard following the tax return deadline after more than 570,000 scams were reported to HMRC in the last year

At this time of year, self assessment taxpayers are at increased risk of falling victim to scams. They can be taken in by scam texts, emails or calls either offering a ‘refund’ or demanding unpaid tax, thinking that they are genuine HMRC communications referring to their self assessment return.

Criminals try and steal money or personal information, using phone calls, texts and emails to try and dupe citizens, and often mimic government messages to make them appear authentic.

In the 12 months to January 2022, nearly 220,000 scams reported to HMRC offered bogus tax rebates. The tax authority responded to 572,423 referrals of suspicious contact from the public.

There were also hundreds of telephone numbers identified as faking HMRC to try to scam taxpayers. HMRC has been working with the telecoms industry and Ofcom to remove more than 920 phone numbers being used to commit HMRC-related phone scams.

The number of phone scams has escalated in the last year with 267,671 reports of phone scams in the last year. In April 2020 HMRC received reports of only 425 phone scams while by January 2022 this had soared to 3,995.

The internet is another minefield with more than 6,160 malicious web pages taken down over the 12-month period.

The various government covid schemes also provided fertile territory for fraudsters. Since March 2020, HMRC detected 463 Covid-related financial scams, mostly disseminated by text message and it worked with internet service providers to take down 443 Covid-related scam web pages.

Myrtle Lloyd, HMRC’s director general for customer services, said: ‘If someone contacts you saying they’re from HMRC, wanting you to transfer money or give personal information, be on your guard.

‘Never let yourself be rushed, and if you’re in any doubt then check our ‘HMRC scams’ advice on gov.uk.’

Following the extension of the self assessment deadline to 28 February 2022, taxpayers have until 1 April to pay their outstanding tax bill or set up a time to pay arrangement to avoid receiving a late payment penalty. Interest has been applied to all outstanding balances since 1 February.

Taxpayers should report suspicious phone calls using the form on gov.uk and forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.

HMRC has a dedicated team working on cyber and phone crimes. They use innovative technologies to prevent misleading and malicious communications from ever reaching the taxpayer. Since 2017, these technical controls have intercepted 500 million emails. More recently, new controls have prevented 90% of the most convincing SMS messages from reaching the public and controls have been applied to prevent spoofing of most HMRC helpline numbers.

HMRC is also reminding people to double check websites and online forms before using them to complete their 2020/21 tax return. People can be taken in by misleading websites designed to make them pay for help in submitting tax returns or charging to connect them to HMRC phone lines.

HMRC’s advice to the public:

Stop:

• Take a moment to think before parting with your money or information.
• If a phone call, text or email is unexpected, don’t give out private information or reply, and don’t download attachments or click on links before checking on gov.uk that the contact is genuine.
• Do not trust caller ID on phones. Numbers can be spoofed.

Challenge:

• It’s ok to reject, refuse or ignore any requests – only criminals will try to rush or panic you.
• Search ‘scams’ on gov.uk for information on how to recognise genuine HMRC contact and how to avoid and report scams.

Protect:

• Forward suspicious texts claiming to be from HMRC to 60599 and emails to phishing@hmrc.gov.uk. Report tax scam phone calls on gov.uk.  

Time is running out for the 1.5 million taxpayers who still need to file their self assessment tax return and avoid a £100 penalty, HMRC has warned

HMRC extended the deadline for completing 2020/21 tax returns to 28 February, deferring late filing penalties for a second year.

About 12.2m taxpayers are expected to file a tax return for 2020/21 tax year and more than 10.2 million were received by 31 January. This still leaves 1.5m tax returns which need to be completed.

HMRC has given taxpayers until 1 April to pay their outstanding tax bill or set up a time to pay arrangement to avoid receiving a late payment penalty. Interest has been applied to all outstanding balances since 1 February.

The existing Time to Pay service allows any individual or business who needs it, the option to spread their tax payments over time. Self assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return. Almost 100,000 people have used this service since April last year, spreading the cost of their tax bill into manageable monthly instalments.

For anyone who owes more than £30,000, or needs longer to pay, they should call the self assessment payment helpline on 0300 200 3822.

Myrtle Lloyd, HMRC’s director general for customer services, said: ‘There is one week left to complete your tax return if you haven’t done so already. And for anyone who is worried about paying their tax bill, there is support available – search ‘pay my self assessment’ on gov.uk.”

From 22 February, taxpayers will be able to make self assessment payments quickly and securely through the HMRC app either connecting to their bank to make their payments or pay by direct debit, personal debit card or corporate/commercial credit/debit card.

The 2020/21 tax return covers earnings and payments during the pandemic. Taxpayers need to declare Covid-19 grants and support payments up to 5 April 2021 on their self assessment, as these are taxable, including:

• Self-Employment Income Support Scheme (SEISS);
• Coronavirus Job Retention Scheme; and
• other COVID-19 grants and support payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme

The £500 one-off payment for working households receiving tax credits should not be reported in self assessment.

Kevin Sefton, CEO of untied, said: ‘We urge affected taxpayers to take control of their tax returns now to avoid adding an extra £100 to their tax bill.  Even if individuals think they have a reasonable excuse for filing late, it’s still best to file returns as soon as you can possibly do so and then contact HMRC later about appealing any penalty.’

HMRC urges everyone to be alert if they are contacted out of the blue by someone asking for money or personal information. It is important to always type in the full online address www.gov.uk/hmrc to get the correct link for filing their self assessment return online securely and free of charge. HMRC sees high numbers of fraudsters emailing, calling or texting people claiming to be from the department. If you’re in doubt, do not to reply directly to anything suspicious, but contact HMRC straight away and search gov.uk for ‘HMRC scams’.