HMRC sending £1,600 fine letters to taxpayers from Thursday

HMRC is set to issue fines of up to £1,600 to people who miss a vital tax deadline on Thursday.

His Majesty's Revenue and Customs sets a deadline of July 31 each year for people who need to pay their self-assessment tax return.

For those who pay online, self-assessment tax returns have a deadline of January 31 each year, for the previous April to April financial year's figures. However, those who have a large tax bill are usually offered the chance to pay it in instalments.

For those with a bill of over £1,000, the bill can be split up into two chunks throughout the year, rather than paying the entire thing in one go. The two payments are due on January 31 and July 31.

But according to finance firm Updraft, the number of people missing HMRC Self Assessment deadlines remains 'stubbornly high' each year. They said that more than 600,000 people missed HMRC's deadlines in 2021-22, rising to 1.1 million in 2022-23, and another 1.1M in 2023-24 tax year, representing one in 11 of those expected to file.

The firm stressed that missing the payment deadlines carries an instant £100 penalty from HMRC, but this escalates the longer you continue without paying.

For being three months late, the fee is £10 a day for £90 days, or up to £900, added to the existing £100 penalty. For being six months late, the fee is 5% of the tax due or £300, whichever is more, on top of the two previous fines.

And for paying 12 months late, the fine is the same as six months added on again, Updraft says, taking the total in fines for late payment to over £1,600.

Updraft told the Express: "Search data collected by Updraft suggests growing confusion and concern: more than 14K people searched for "HMRC penalty" in the past month, which is a 13% increase year-on-year, and up 12% just in the last week. The stats are an indication that thousands are scrambling to understand what happens if they miss HMRC's tax deadlines.

"Yet despite this surge in interest, the reality is that many people are still missing critical dates altogether. According to HM Revenue and Customs (HMRC), an estimated 1.1 million people missed the filing deadline for their annual Self Assessment tax return in the last two tax years. That means over a million taxpayers risked at least £100 in penalties just for being late."

Aseem Munshi, Founder of Updraft, experts in helping people pay off credit card debt and build confidence with their consumer credit, explains: "It's not just penalties that hit late taxpayers, but interest charges can quietly cost even more over time. Since 2020, HMRC has charged a staggering £513 million in interest on the late payment of income tax. That's money paid not in tax owed, but simply for missing deadlines.

"For self-employed individuals, these interest charges can add up quickly, especially if deadlines like the 31 July payment on account are missed and not addressed for months. Currently, HMRC's interest rate on late payments is 7.75% per annum.

"When people think about missing a tax deadline, they may often worry about the £100 fine but forget interest charges. That's what really drains finances over time. The £513 million HMRC has collected in interest shows just how many people are paying extra simply because they may not have been aware of the penalties and interest."