Late payment penalties under self assessment

Produced by Tolley
  • (Updated for Budget 2021)

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Late payment penalties under self assessment
  • Introduction
  • Future rules ― income tax self assessment and VAT
  • Income tax, capital gains tax, ATED, Class 2 and Class 4 NIC
  • Corporation tax
  • Current rules
  • Future rules
  • Time to pay arrangements
  • Reasonable excuse

Late payment penalties under self assessment

Introduction

The late payment of tax will invariably attract interest as outlined in the Interest on late paid tax guidance note. In addition, the late payment of tax may also attract alate payment penalty, depending on the type of tax that has been paid late.

FA 2009, Sch 56 introduced alate payment penalty regime that was intended to harmonise the rules for different taxes. This is being introduced in stages and is not yet fully in force. As aresult, there are anumber of different regimes in place.

This guidance note covers penalties on late paid income tax, capital gains tax, annual tax on enveloped dwellings (ATED), Class 2 and Class 4 NIC (other than income tax and NIC due under PAYE), which are all subject to the late payment harmonised penalty regime.

The main taxes that have not yet been brought within the scope of the harmonised penalty regime for late payment are:

  1. corporation tax ― see further information below

  2. VAT ― see the Default surcharge guidance note

  3. income tax and Class 1 NIC that should have been paid over through the PAYE system ― see the Late payment penalties for PAYE / NIC guidance note

Since 18 November 2015, HMRC has had the ability to instruct banks and building societies to deduct amounts to settle taxpayers' tax debts directly from their bank accounts, often referred to as the ‘direct recovery of debt’ (DRD) provisions. As aresult of these, it is less likely that more than one late payment penalty will be issued by HMRC, as the tax can be directly recovered from the debtor’s bank account. For more details, see the Direct recovery of debts guidance note.

Future rules ― income tax self assessment and VAT

As part of the introduction of making tax digital (MTD), there is to be anew late payment penalty regime that will apply for income tax self assessment and VAT.

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