Taxpayers filling out self-assessment forms warned they could face a hefty increase in fees if they don’t pay what they owe by the end-July deadline
Taxpayers filing their returns are being warned that they will face a steep increase in costs if they don’t pay what they owe by the end of July.
More than 12 million people self-declare each year. Their bills are paid in two installments. The first prepayment is due at the end of January – but there is also a second installment on July 31.
If you fail to pay this further bill on time, you will incur late payment interest charges which will increase. The rate is currently 7 percent of the amount owed, as it is 2.5 percentage points above the Bank of England’s base rate.
But interest rates are expected to rise Thursday in a bid to contain inflation, leading to an increase in the penalty for late taxpayers. The financial markets now believe that the base interest rate will reach 6 percent by the end of the year, pushing interest charges for arrears to 8.5 percent.
But as the cost-of-living crisis continues to bite and summer vacations eat away at our savings, there are fears that many taxpayers won’t pay this bill on time.
Tax can be onerous: the first prepayment is due at the end of January – but there is also a second payment due on July 31
Sarah Coles, head of personal finance at asset manager Hargreaves Lansdown, says: “The deadline for payment on account is looming. It hits at such a busy time of year – when families are over their heads in summer plans – so there’s a good chance you’ll lose track and forget to pay.
“Many are so focused on getting their paperwork done on time that they forget about this part of the bill. You can be penalized for underpaying tax – despite all the hassle of filing your tax return.’
New figures from tax specialist Thomson Reuters also show that the Tax and Customs Administration and Customs issued more than 18,000 fines last year for negligent errors in tax returns.
Around two million people also filed their returns after the January 31 deadline – so they were automatically hit with a £100 fine and interest charges on the amount owed, which is calculated daily.
Sticking your head in the sand will only make matters worse, as you could still be fined £10 per day for up to 90 days if you still haven’t filed your tax return. Additional fines will then follow after six months, followed by further fines if you still have not filed a tax return after 12 months.
The 18,000 fines for ‘careless errors’ imposed by the Tax and Customs Administration resulted in fines ranging from a slap on the wrist with no financial cost to fines of up to 30 percent of unpaid tax.
Separately, another 10,700 taxpayers deemed to have committed “intentional errors” — including attempting to conceal payments — were fined between 20 and 70 percent of their tax dues.
Simon Brookings, tax and accounting manager at Thomson Reuters, says: “All of these fines imposed show how important it is to ensure that tax returns are accurate – and how important accounting advice often is. The IRS may be lenient on the first mistake, but repeated offenses are a red flag to try to pull the wool over their eyes.” Failing to pay your tax due by the July deadline will not only incur interest charges, but could also put you in the spotlight.
Those who don’t pay the amount due by the July deadline — whether they forgot or simply couldn’t find the lump sum needed — can avoid missing future deadlines by setting up automatic payments.
If you have a ‘time to pay’ arrangement with the IRS, you can spread the amount of tax due over the year over 12 easier-to-pay monthly installments – up to a maximum of £30,000.