Unbeknown to many, HMRC has changed their fine system over the last few years and made it more punitive to the un-filed self-employed person.
Understandably, with the Taxi industry being at the forefront of the COVID crisis, many drivers are still in a difficult financial predicament in 2021, even those that were lucky enough to have received SEISS grants. This has led to a problem with people being late with their tax returns because drivers don't have the funds to settle the last tax bill, let alone this year’s.
While this is a difficult situation, we wish to clarify the fines in this article because they accumulate most quickly in the summer months. In our opinion, it is still worth getting your 2020 return filed ASAP to avoid further financial pain further down the road.
As you know, the 2020 financial year finished back in April 2020 just at the start of lockdown. HMRC allows you to file your 2020 return up to the 31 January 2021. After this, if you have not filed your return, you are late and you will receive a £100 penalty, but this is only the beginning.
Then here is the tough part: if you have not filed your tax return after 3 months, HMRC starts to charge £10 per day for 90 days up to a maximum of £900.
The above penalty starts to be charged on the 30 April, and it finishes at the end of July. If you are reading this now and have still not filed your 2020 return, you may well have accumulated nearly £600 of fines already (as of 26 June), and there is still another £300 of fines to come - so get your return filed now if you can.
This is why at Short and Sons, we have pushed our clients to get their returns completed before now, even though times are tough.
If you still leave it outstanding at 6 months (immediately after the £10 a day fine ends), another 5% fine or £300 - whichever is greater – is given, so most drivers will be hit with £300.
And finally, at 12 months late, you can be charged up to 100% of the tax estimated.
Unfortunately, HMRC will add these files to the total tax bill when it comes to payment, and no one wants that.