What happens if I pay my Self Assessment tax late

Importance of meeting deadlines

Failing to meet HMRC-imposed deadlines can result in serious penalties. Late Self Assessment tax payment results in automatic penalties, which will increase over time. A failure to meet deadlines will also incur interest charges, which accrue on any unpaid tax from the date it is due.

By meeting HMRC deadlines, you can help maintain your cash flow by avoiding unexpected charges and allowing for more accurate financial and tax planning. You’ll also ensure compliance, maintain a good standing with HMRC, and avoid investigation.

Late payments can also affect your credit rating, which can impact your future ability to borrow money, both for yourself and your business. Finally – and importantly – meeting the deadlines will avoid stress and anxiety associated with late submissions and the subsequent penalties.

Immediate Consequences of Late Payment

Late Self Assessment tax payment will trigger initial reminders and warnings from HMRC that tax is owed. In some situations, there may be a 30-day grace period, but this is not a given: individuals registered for Self Assessment should always meet the deadlines to avoid being penalised.

Penalties for Late Self Assessment Tax Payment

The penalties for late Self Assessment tax payment start low, but increase significantly the later the payment is made.

Individuals are charged an initial penalty of £100 if their Self Assessment return is not filed by the due date, regardless of whether or not any tax is owed. They will then be charged daily penalties of £10 per day for returns filed over three months late, up to a maximum of 90 days (£900).

If a return is filed more than six months late, the individual will be charged an extra £300 or 5% of the tax that is due (whichever figure is higher). A return submitted more than 12 months late will incur another penalty of £300 or 5% of the tax due—again, whichever figure is higher.

A late payment penalty of 5% of the unpaid tax will be levied 30 days, 6 months, and 12 months after the payment due date, and interest is charged on both unpaid tax and penalties starting from the due date.

Interest Charges on Late Payments

Interest charges on late Self Assessment tax payments can mount up quickly. Interest starts to accrue on any unpaid tax from the day after the payment due date. The rate at which this interest is charged is set by HMRC, is applied to the outstanding tax amount, and can change over time.

This interest is compounded, meaning that it is calculated based on both the unpaid tax and any interest that has accumulated. Interest may also be charged on unpaid penalties and is charged on a continuous basis until the full payment – including both the original tax owed and any penalties – is made.

Individuals registered for Self Assessment should also be aware that there is no cap on the amount of interest that can be charged: it continues to accumulate until the debt is cleared. If you are unable to pay on time, it is vital that you take action.

What to Do If You Can’t Pay on Time

If you foresee a late Self Assessment tax payment, you will need to inform HMRC as soon as possible. You can request a Time to Pay Arrangement to spread your tax payments over a certain period of time, although there is no obligation for HMRC to agree to this.

Be prepared to provide evidence of your financial situation to HMRC to explain why your tax bill cannot be paid. Review your finances to assess how much you can realistically afford to pay and when – and if possible, make partial payments towards your tax bill to reduce your overall debt and interest charges.

If managing your tax liabilities is proving to be a struggle, consider consulting with a tax professional or accountant who will be able to provide guidance on making the process easier.

Even if you know you will be unable to pay your tax bill on time, it is still vital that you file your Self Assessment return by the deadline. Finally, keep communication with HMRC open and regular, keeping information about your payment status and any changes to your financial situation up-to-date.

How to negotiate time to pay arrangements with HMRC

If you are likely to experience problems paying your tax bill, make early contact with HMRC to let them know. Prepare your information in advance, ensuring that you have your Unique Taxpayer Reference (UTR) number and details of your tax bill to hand.

Explain your situation, giving reasons why you are unable to pay your tax bill by the due date and propose a payment plan that is realistic and affordable.

You may be required to provide financial details, such as your income, expenditures, liabilities, and assets, which HMRC will use to assess whether your proposed payment plan is justified. You will then need to agree on terms with HMRC and decide on a duration and other payment plan terms that are manageable for you.

Once a payment plan has been agreed, be sure to stick to the agreement to avoid further penalties down the line. Should your financial situation change, keep HMRC informed, as it may be possible to renegotiate the terms of your agreement.

How QAccounting Can Help with Your Self Assessment

Self Assessment tax returns can seem daunting, but they don’t need to be. At QAccounting, we can take care of everything for you, preparing and submitting your return in a timely manner. This will help you save time and money and avoid fines and penalties. We will also ensure that you are taking advantage of any allowances you are entitled to, potentially reducing your tax liabilities.

With decades of experience, dedicated account managers, comprehensive accounting software and great client reviews, we’re proud to be chosen by so many sole traders and freelancers. Our accounting packages can be tailored to suit your exact needs, and our flexible contracts mean you won’t be charged for services that aren’t relevant.

Find out more about our self assessment services here, and get in touch to find out how we can help.