Make sure you don't incur the new Tax Return penalties

Since 1997 the penalty for filing your tax return after the 31 January deadline has been £100 with another £100 if you still hadn’t filed six months later.  £100 is worth a lot less now than in 1997 and over recent years many people have thought it worth paying to file their tax return late.  You could also previously avoid the penalty by paying what tax was owed by the end of January even if you hadn’t filed your Return.

This year, the Government have decided to make the penalties a lot tougher.

If you file your 2011 Return after 31 January 2012 the penalties are:

·         One day late – a fixed penalty of £100

·         Three months late - £10 for each of the following ninety days up to a maximum of £900

·         Six months late – £300 or 5% of the tax owing, whichever is higher

·         Twelve months late – a further £300 or 5% of the tax owing.

For example; let’s say you file your 2011 Tax Return on 2 November 2012 and owe £10,000 tax. Your penalty will be £1,500! A £100 fixed penalty, the maximum £900 daily penalty and a 5% penalty of the tax owing being £500.  Much more than the £200 you would have paid under the old system which you could have avoided by paying the tax on time.

As well as ramping up penalties the Government have also stopped the “get out of jail free” card of paying your tax by the deadline.  The penalties are for late filing of returns and still apply even if you pay your tax on time.

All you need to do to avoid the penalties is file your Tax Return by 31 January 2012.  Contact Andrew Grant on 01246 208282 if you need more advice.