Avoid Self Assessment penalties

Self Assessment has three separate penalty regimes, for filing late, paying late and failing to tell HMRC that you need to file. More than one can apply to the same return. Interest on unpaid tax is charged on top, and it is not a penalty.

Filing on time

HMRC must receive your return by the deadline, and posting a paper return in time is not enough. You can file from 6 April, the day after the tax year ends, so filing early leaves time to find the money. File even if you owe no tax, because the late filing penalty does not depend on how much tax is due.

If you will not know your profit for the whole tax year by the deadline, file on time with provisional figures and say that you have used them. You then have 12 months from the filing deadline to correct the return. If you owe more tax once the figures are final, you pay interest from the original due date.

If you no longer need to file, for example because you have stopped being self-employed or stopped renting out property, tell HMRC as soon as you can. HMRC needs time to review your request before 31 January, and you can get a penalty if you leave it too late.

Late filing penalties

A penalty arises the day after the filing deadline and builds up the longer the return is outstanding. You pay it within 30 days of the date on the penalty notice. If HMRC charges a penalty on a return you did not need to send, ask HMRC to cancel it. A partnership return that is late attracts a penalty for each partner.

Late payment penalties and interest

Your balancing payment is due on 31 January after the end of the tax year, with the first payment on account, and the second payment on account is due on 31 July. Late payment penalties apply to the balancing payment but not to payments on account. Interest applies to both from the due date until you pay.

Interest also runs on a penalty that you pay late. HMRC repays interest to you if it later agrees your appeal against a penalty that you had already paid.

If you cannot pay on time

Contact HMRC as early as you can, ideally before the deadline. You may be able to set up a payment plan (known as Time to Pay) online or by phone, and HMRC checks that the instalments are affordable for you. If you have savings or assets, HMRC expects you to use them to reduce what you owe first. If you cannot agree a plan, HMRC asks you to pay in full.

You can also pay in instalments before a bill is due with a Budget Payment Plan, which takes weekly or monthly Direct Debits towards your next bill.

Failure to notify

If you do not tell HMRC by 5 October that you need to file, you can be charged a failure to notify penalty. It is a percentage of the tax that was unpaid because you did not notify, which HMRC calls the potential lost revenue, and it appears only if tax is left unpaid after 31 January. The percentage depends on whether the failure was deliberate and whether you told HMRC before it found out, and it reduces the more you help HMRC.

Reasonable excuse and appeals

You can appeal a penalty if you had a reasonable excuse.

Appeal to HMRC within 30 days of the date on the penalty notice, online or by post on form SA370 for an individual or SA371 for a partnership. You can still appeal late if you explain why. Consider paying the penalty while you appeal, because if the appeal fails you owe interest on it from the day it was due.

What to do