HMRC collected a quarter of a BILLION pounds from taxpayers in late penalties in just two years

The tax office collected a quarter of a billion pounds in late penalties in just two years, according to new figures shared with This Is Money.

HMRC collected £251million from self-assessment taxpayers in late penalties between 2021 and 2023, according to a Freedom of Information request by NFU Mutual.

In the tax year ended April 2022, £157million was paid in late penalties by taxpayers for failing to file their self-assessment tax return on time, and £94million was paid in the year ended April 2023.

The number is only set to rise as more people who have never filed a tax return are dragged into the net.

This includes people whose total taxable income jumps above the £150,000 threshold at which all earners must submit a tax return.

Over a million taxpayers failed to meet the most recent self-assessment deadline on 31 January, almost double the number in the previous year.

Those who fail to file on time face an initial £100 penalty and if it is still not paid after three months they will face additional charges of £10 per day, up to a maximum of £900.

After six months, a further 5 per cent will be added to the amount due or £300, whichever is greater. And after 12 months, another 5 per cent or £300.

Taxpayers aged 35-44 have racked up the highest number of penalties paying £39 million in 2022 and £22 million in 2023, according to the FOI.

They were followed by 45-54 year olds paying £55 million and 25-35 year olds paying £50 million.

Taxpayers over the age of 65 paid the lowest amount of penalties at £25 million, with £15 million paid out in the 2021/22 tax year and £10 million in 2022/23.

The figures are subject to change as the penalties will continue to increase, according to HMRC.

The online filing deadline for the 2022/23 tax year was 31 January 2024 so the 12-month late filing penalties relating to that tax year have not yet been raised, it said in the FOI.

A spokesman for HMRC said: 'Our aim is to support taxpayers to get their tax right and avoid fines altogether, with the overwhelming majority of customers filing on time.

'We charge penalties to encourage customers to meet their obligations, while acting as a sanction for those who don’t.'

HMRC will hike late payment interest to 8.5 per cent from 6 April, its highestlevels ince January 2008.

Charlene Young, senior pensions and savings expert at AJ Bell said: 'In her October Budget, the chancellor gave the green light for HMRC to up the interest penalty that can be charged from the Bank of England’s base rate plus 2.5 per cent to the base rate plus 4 per cent, meaning it will stand at 8.5 per cent from 6 April 2025.

'In contrast, HMRC will continue to only pay base rate minus 1% on repayments owed to taxpayers, equivalent to 3.5 per cent.

'HMRC can still also give themselves more time to pay compared to taxpayers. That’s because late interest is chargeable immediately, yet the repayment supplement only kicks in if HMRC are a year late.'

Changes announced in the Spring Statement last week also mean that more self-employed taxpayers will face harsher late payment charges.

The Treasury published plans to increase late payment penalties for VAT and income tax self-assessment (Itsa) taxpayers as they join the 'Making Tax Digital' scheme from April 2025.

The digital scheme requires individuals and businesses to keep digital records and submit updates every quarter.

VAT and Itsa taxpayers face charges from His Majesty's Revenue and Customs if they file late, which includes a first penalty then an additional penalty, with an annualised penalty rate.

Currently, a taxpayer will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date.

After day 15 they are charged a fine of 2 per cent of the tax due.

If the tax is still unpaid after 30 days, taxpayers will face another 2 per cent, meaning a total 4 per cent charge by day 30.

From April 2025, taxpayers that are part of the MTD scheme will be charged 3 per cent of the outstanding tax where their tax is overdue by 15 days, plus another 3 per cent if it is still unpaid at 30 days.

They will also face a doubling of the annualised rate, from 4 per cent currently to 10 per cent.