Self-assessment taxpayers have been urged to start work on their 2010/11 Income Tax Returns if they want to avoid draconian penalties for filing late.
While the filing deadlines for the 2010/11 return remain 31 October for paper returns and 31 January for electronic returns, taxback.com warns that HM Revenue & Customs (HMRC) can wield harsher new powers over those filing their returns late this year.
Previously, late taxpayers received an automatic penalty capped at the lower of £100 or the tax at stake, providing little or even no incentive to file if they thought they had no further tax to pay.
Under the new regime, however, a £100 penalty is automatically generated for a late return which cannot be reduced.
A penalty of £10 per day is also generated for every day the return is late, which could eventually end up totalling £900 if the 90 day cap is reached.
If the return has not been submitted within six months of the deadline, a penalty of £300 or 5% of the tax at stake is applied, whichever is higher.
Meanwhile, if the return has not been submitted within 12 months of the deadline, HMRC has the right to apply a penalty equal to 100% of the tax at stake.
With each penalty applied independent of the other, it is warned that the amount owed could quickly escalate.
For instance, a taxpayer who is due to file an electronic return by 31 January 2012 but who does not do so until 31 December 2012 will face penalties of at least £1,300 (£100 plus £300 for filing more than six months late, plus £900 for being more than 90 days late).
"This is, in fact, the minimum penalty applicable in this scenario," said Seamus Murphy, senior tax manager at taxback.com. "If the tax at stake is considerable the penalties will be significantly higher than this.
"So if you need to file a tax return you should not leave it until the last minute. Unlike previous years, if you miss the deadline this year you will find yourself significantly out of pocket."
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