Taxpayers who failed to meet the January 31 self-assessment deadline could soon face escalating penalties and interest. A slight downturn in late payment interest rates for more than 1.1 million late filers was announced, as HMRC reduced it from 7.25 per cent to 7 per cent - calculated by adding 2.5 per cent to the base rate.
Though the move provides some financial relief to potentially millions of people, tax specialist Andy Wood from Tax Natives said: "While this drop in HMRC's late payment interest offers some relief, it's hardly significant in the grand scheme of things. The real issue is that taxpayers still pay double the interest on late payments compared to what HMRC pays them in refunds. That's a fundamental imbalance.”.
The issue noted is that the difference in interest between late payments and refunds sees HMRC paying an interest rate of only 3.5 per cent on tax overpayments - calculated as the base rate minus 1 per cent (though never less than 0.5 per cent). Late taxpayers are feeling the pinch, as HMRC imposes a £100 fine for returns up to three months overdue. Fines beyond this time escalate, as late filers gradually rack up more of them.
HMRC revealed earlier this month that over 11.5 million taxpayers beat the deadline to file their tax return for the 2023-2024 tax year by the end of January - even though thousands left submitting their returns until the final hour. Thereafter:. Those who failed to get their return in on time are also charged interest on outstanding tax owed.
Mr Wood said: “Beyond financial penalties, the longer a tax bill remains unpaid, the greater the risk of HMRC scrutiny. Late payments can flag taxpayers for further investigation, which can be time-consuming and costly.”. People may be able to get a tax refund (rebate) if they’ve paid too much tax, according to the Government website.
Sometimes, a tax calculation letter advises this can be claimed online. You can either:. The reference number from your P800 letter will be needed, as well as your national insurance number. Alternatively, a refund can be claimed via:. More than 370,000 letters have been dispatched to older Britons, especially women, that have urged them to review their State Pension. It has been noted that the amount may be less than what they are entitled to.
Department for Work and Pensions figures recently showed the average arrears payment is roughly £8,000 on the progress of rectifying historical State Pension errors. Last November, it was announced more than 370,000 letters were sent out and it was revealed that from January 8 to the end of September last year, action to check and correct individual cases identified 5,344 underpayments, with owed total arrears of around £42 million.
