A tax expert has issued a strong warning
Taxpayers across the UK are being urged to take urgent action if they fall into one group. Should the estimated one million people confirmed by HMRC to have missed the deadline for filing their tax return at the end of January fail to settle what they owe by the three-month cut-off at the end of April, they could be looking at a combined £1 billion bill in fixed and late payment penalties.
That’s according to financial advisory firm Hoxton Wealth, which suggested it should serve as a cautionary tale for those managing their personal finances not to join that swelling number. HMRC confirmed that 27,456 individuals submitted their returns in the final hour before the cut-off for 2024-25 returns at midnight on January 31.
“Where a tax return is filed late, the consequences can be significant, particularly if the tax is also paid late,” said Claire Spinks, Hoxton Wealth’s global head of tax. “The £100 fixed penalty for missing the filing deadline is just the tip of the iceberg.
“If you are more than three months late, you will pay £10 per day for up to 90 days to a maximum of £900. If you are more than six months late, then you will have to pay a further £300 or 5% of the tax liability, whichever is higher.
“And there is the same penalty again at 12 months. If the tax isn’t paid by the January 31 deadline, then interest accrues daily from that date until payment. HMRC’s current interest rate is 7.75%.”
How HMRC penalties can accumulate
Additionally, Spinks explained, there are late payment penalties that apply regardless of whether the return itself was submitted on time. These include 5% of the tax owed 30 days after 31 January; a further 5% of the tax owed after six months and a further 5% of the tax owed after 12 months. For those filing and paying late, all these charges will apply.
She said: “Normally, HMRC has 12 months from the date a return is submitted to open an enquiry. If the return is filed late, that enquiry window is extended to 12 months from the end of the quarter in which the return is filed, increasing the period of exposure.
“So, if a 2024/25 tax return is filed on August 8, 2026, showing a tax liability of £25,000, and the tax is also paid late on that date, you are facing late filing penalties of £2,250; a late payment penalty of £2,500 and £1,003 in interest.
“That’s a total additional cost of £5,753, which is around 23% of the original tax liability, purely due to a six-month delay.
“In my experience, people often delay filing because they are worried about the tax bill. However, it is almost always better to file on time, reduce late-filing penalties, and then put a Time to Pay arrangement in place with HMRC. While interest will still run, a Time to Pay arrangement prevents late payment penalties from arising.”
The expert further noted that for UK citizens residing abroad, the repercussions of missing deadlines could be even more drastic: “In a cross-border context, missed UK tax deadlines can have consequences that go well beyond late-filing penalties.
“For individuals living overseas, late or incomplete filings can delay or in extreme cases prevent access to relief under Double Taxation Agreements, resulting in UK tax being charged upfront and reclaimed only later, if at all. The result is that a missed deadline can multiply both cost and complexity, even where there was no intention to underpay tax.”
