A recent First Tier Tribunal (FTT) case has revealed the importance of staying on top of your tax returns even if you think you don’t owe any tax – as a UK taxpayer who lived overseas learned the hard way.
In this case, the taxpayer had submitted his tax returns on time as a UK resident. However, while living abroad during the 2020–2021 tax year, he assumed he didn’t need to submit a self-assessment tax return that year, as the income from his UK property was covered by his Personal Allowance.
Despite the lack of tax liability, HMRC charged significant penalties for late submission.
Here’s what you should be wary of if you don’t want to end up in the same boat!
Failed appeal against late tax return penalties
The taxpayer in question eventually submitted his 2020–2021 tax return over a year late, which resulted in a total penalty of £1,600 from HMRC even though no tax was due.
This included an initial £100 penalty for missing the filing deadline, a £10 daily penalty for 90 days, and two £300 penalties for filing more than 6 months late and more than 12 months late.
The taxpayer submitted an appeal and argued at the hearing that he could neither submit a return nor open emailed penalty notices due to lack of internet access while living overseas.
He also argued that postal delays were outside of his control, but in both instances, the FTT determined that the taxpayer should have taken more responsibility in organising his tax affairs – such as making arrangements to forward mail from the UK to his overseas address.
Ignorance of the law was not accepted as a reasonable excuse to appeal a tax penalty.
Make sure to file returns and pay taxes on time
This is an example of why it’s so essential to stay on top of your tax filing obligations, even if there is no tax due to be paid. The £1,600 fines were only penalties for late tax returns, so the total would have been even higher if there was also an overdue tax bill.
If tax was due, HMRC would charge both penalties and interest on the outstanding amount. The tax agency currently charges 7.25% interest on late payments, but the UK government will be introducing an extra 1.5% levy on late tax payments from 6th April 2025.
To get an estimate of the penalties and interest you might owe for a late self-assessment tax return or payment, you can use the online calculator on the government website.
Alternatively, to help you navigate tax penalties and avoid them in the first place by filing and paying on time, you could turn to professional tax consultants like our accountants in Barnsley.
Call the gbac team on 01226 298 298 or email us at info@gbac.co.uk to learn more about how we can get your tax affairs in order by optimising allowances and ensuring deadlines are met.