Late interest penalties hit 1.4 million taxpayers – and it could get worse
The 2020/21 tax year saw 1.4 million people charged interest on overdue tax payments – a 15 per cent increase on pre-pandemic figures.
The data was released after a Freedom of Information request by investment platform, AJ Bell, but this did not disclose how much money HM Revenue & Customs (HMRC) raised from these late payment penalties.
The increase came despite a drop in how much money many would have owed HMRC due to furlough during the pandemic and corporate dividend cuts.
Number of taxpayers facing penalties is predicted to increase
The overall amount of people paying late payment charges on missed tax deadlines is predicted to rise.
By the 2024/25 tax year, the number of people HMRC estimate to be paying dividend tax and Capital Gains Tax will increase to 2 million.
This increase means there is a far greater chance that hundreds of thousands more taxpayers could face late payment charges, based on the current proportion of those missing the deadlines.
Late payment interest rate increases
With more and more people having to pay penalties for overdue tax payments, it will not be of great comfort for many to learn that the interest rates on these charges have increased.
As of 31 May 2023, the interest rates on late tax payments rose from 6.75 per cent to 7 per cent.
It is important to note that HMRC will align future hikes to these interest rates with the base rate set by the Bank of England.
This base rate has rocketed in the past 12 months as the Government attempts to stem inflation, and it is predicted that it will continue to rise in the coming months.
This will in turn mean that late tax payment interest rates will increase. This should stand as a warning to UK taxpayers to ensure that their taxes are filed and paid on time.
If you’d like advice on how to submit your tax returns on time, please contact us.
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