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To mark the start of a new tax year HMRC have presented taxpayers with a new incentive to file their tax returns on time! New Self Assessment penalty provisions will be introduced in respect of 2010/11 Tax Returns which are filed late.* The new provisions introduce automatic daily penalties and tax geared penalties which result in a penalty of at least £1,300 becoming payable if your Return is filed over 6 months late.**

The penalties can only be avoided by ensuring your 2010/11 Tax Return is filed on time! It is no longer possible to mitigate the penalty by simply ensuring all of your tax is paid by the due date. In addition, surcharges continue to apply in respect of late paid tax with penalties of 5% being applied to unpaid tax which is 30 days late , six months late and twelve months late.***

This impact of these new Self Assessment penalty provisions is demonstrated with a simple example:

Mr A is required to file a 2010/11 Tax Return, however as he anticipates a small tax liability (less than £100) he does not give this priority and files the Return on 1 July 2012. The Return is five months late and as a result the automatic late filing penalties that will apply are as follows:

Initial Penalty £100
Automatic Daily Penalty - £10 per day (> 3 months late) £610 (61 days)
Total Late Filing Penalty £710

As you can see, these new penalty provisions can prove very expensive and make it even more important for taxpayers to file tax returns on time. As you might expect, there are other advantages (reputational and otherwise) to not filing your returns late and our team would be happy to discuss these with you.

* The first deadline for filing a paper tax return is 31 October 2011; tax returns filed on line must be filed by 31 January 2012. Other submission deadlines may apply depending on your circumstances.

** New HMRC Self Assessment Late Filing Penalties

*** Penalties for paying your tax late