The info exhibits the Authorities has already collected £137.5m
Martin Lewis discusses late submitting payment for tax self-assessment
Greater than 1.3 million taxpayers have been charged curiosity for failing to do that on time, new figures reveal.
The info exhibits the Authorities has already collected £137.5m in late-payment curiosity for the 2023/24 tax yr.
That equates to a median curiosity cost of simply over £100 per particular person. Nevertheless, the ultimate whole is more likely to rise considerably as a result of the figures solely embrace instances the place the curiosity or penalty has already been paid.
Earlier years present how the invoice can shortly develop. Revised figures for 2022/23 present a document £200.1m was collected from 1.62m taxpayers, with the typical cost reaching £123.52.
Specialists say the issue displays the rising complexity of the tax system and the squeeze on allowances that’s dragging extra individuals into self-assessment.
The info exhibits the Authorities has already collected £137.5m (Picture: Getty) Private finance information, cash saving suggestions and recommendation plus selcted presents and competitions Subscribe Invalid electronic mail
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The figures additionally come as HMRC has made penalties harder. From April 6, 2025, late fee curiosity was elevated to 4% above the Financial institution of England base charge, up from 2.5% above base charge beforehand. Curiosity accrues every day on the tax owed.
Charlene Younger, senior pensions and financial savings knowledgeable at AJ Bell, mentioned the figures present taxpayers are nonetheless struggling to navigate the foundations. She mentioned: “These newest figures counsel that taxpayers nonetheless face issue navigating the UK’s advanced tax system and HMRC are cashing in because of this.
“Tens of millions have paid late fee curiosity in latest tax years, regardless of strikes to chill out the foundations on who should file a self-assessment return.Tax-free allowances for dividends have been repeatedly slashed since 2018, with the present allowance standing at simply £500 in comparison with its unique £5,000 stage.
“The charges of earnings tax on dividends additionally went up in 2022 and can bounce once more for fundamental and better charge taxpayers subsequent tax yr. It’s an analogous story in terms of income on investments outdoors of ISAs and pensions, with a decrease capital positive factors tax allowance and up to date hikes to the charges of tax due.”
She added that the squeeze is pulling smaller buyers into submitting tax returns for the primary time.
“This good storm drags smaller buyers into calculating and paying these taxes for the primary time but additionally means payments for present taxpayers have jumped.”
Greatest shake-up in many years
A serious overhaul of the tax system can be on the horizon. From April 6, 2026, Making Tax Digital (MTD) would require many sole merchants and landlords incomes greater than £50,000 to submit quarterly on-line tax updates.
The edge will fall to £30,000 in April 2027 and £20,000 the next yr. The Authorities says the transfer will modernise the system and assist shut the tax hole, with officers aiming to lift £780m by 2028-29.
However critics warn it’s going to pile additional admin onto thousands and thousands of small enterprise house owners and landlords.
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Ms Younger mentioned: “From April 6, 2026, sole merchants and landlords with a qualifying earnings over £50,000 should submit quarterly on-line returns, with the qualifying threshold regularly reducing to £30,000 from April 2027 and £20,000 the yr after.”
Taxpayers affected may also have to make use of suitable paid-for software program moderately than HMRC’s free submitting system. In accordance with AccountingWEB, 97% of unrepresented taxpayers used HMRC’s personal system to file their return earlier than the January 31 2025 deadline – equal to 4.5m returns.
More durable penalties forward
Underneath the present system, taxpayers who miss the submitting deadline face an preliminary £100 nice, with additional penalties the longer the return goes unfiled. However the brand new MTD regime introduces a unique construction.
Late fee penalties can be 3% of the excellent tax after 15 days, one other 3% after 30 days, after which 10% per yr on the unpaid stability from day 31 onwards.
Late submissions may also set off a penalty factors system, with a nice issued as soon as a taxpayer reaches 4 factors. Ms Younger warned that regardless of the brand new system being designed to enhance compliance, some individuals may find yourself paying much more.
“Though the penalty factors system may show fairer in terms of errors, individuals may face greater payments below MTD for late fee of cash owed because of the new penalties.”
She mentioned a self-employed particular person owing £25,000 in earnings tax may see their invoice rise to round £26,900 after 4 months below the present system – however near £28,000 below the brand new guidelines.
“Whereas the adjustments might assist HMRC to clamp down on unpaid tax, it stays to be seen how simply enterprise house owners are capable of adapt, and whether or not HMRC will find yourself financially benefiting from low ranges of engagement with the brand new system.”
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