If you work as a contractor, freelancer or small business owner in the UK, it’s incredibly important to keep track of your filing and payment deadlines, as well as changing tax rates and thresholds. Sole traders only have to report to HMRC, which makes life relatively straightforward. Limited companies, however, have much more to contend with. They must report to both HMRC and Companies House, so the opportunity to miss a deadline (and receive a hefty fine) is greater.
Both sole traders and limited companies can face significant financial penalties if a filing or payment deadline is missed, even by just one day. If you find yourself in this situation, you’re unlikely to be shown very little mercy from HMRC or Companies House, in most cases. To help you stay on top of your legal obligations and give you some motivation to stay organised, here’s a rundown of the important deadlines you must meet, and the potential penalties for non-compliance.
- HMRC penalties
- Companies House penalties
Missing any of the filing or payment deadlines imposed by HMRC can result in various on-the-spot penalties or tiered fines based on the degree of lateness.
Self Assessment is a requirement of sole traders, limited company directors and shareholders, and members of Limited Liability Partnerships. However, directors who only receive a salary through PAYE, as opposed to receiving additional income from any other source (e.g. dividends, director’s loan payments) do not have to file Self Assessment tax returns because their Income Tax and National Insurance payments are deducted through payroll.
HMRC has two types of penalties for Self Assessment. One for late filing of annual tax returns, and another for late payment of the Income Tax and National Insurance Contributions reported on the tax return. The deadlines are:
- Paper tax returns sent by post: 31st October after the end of the tax year.
- Online tax returns: 31st January after the end of the tax year.
- Payment of all Income Tax and National Insurance owed: 31st January after the end of the tax year.
The tax year runs from 6th April to 5th April the following year. Self Assessment tax returns and payments deadlines for the 2018-19 tax year, which ends runs from April 6th 2018 until 5th April 2019) are:
- 31st October 2019 (filing paper returns)
- 31st January 2020 (filing online returns and paying tax and NIC)
It’s always a good idea to complete and send your personal tax return as soon as possible after the end of each tax year, simply to avoid forgetting until the last minute and potentially missing the deadline or making a mistake.
If you miss the 31st October deadline, it’s not really that much of a problem because you can file your return online until 31st January without facing any penalties. You just won’t be able to send your return by post after the October deadline has passed.
Penalties for late Self Assessment tax return
If your Self Assessment tax return is delivered to HMRC after the deadline of 31st January, the following financial penalties will be imposed:
- Missed deadline – automatic £100 fine
- 3 months late – £10 daily penalty for up to 90 days
- 6 months late – 5% of tax due or £300 (whichever is greater)
- 12 months late – 5% of tax due or £300 (whichever is greater)
The automatic £100 penalty is applied if you miss the deadline by just one day, even if you don’t owe any tax. HMRC may apply additional penalties if it is believed you are intentionally withholding information or trying to evade tax.
Penalties for late payment of Self Assessment tax bill
- 30 days late – 5% of tax due
- 6 months late – 5% of tax due at that date
- 12 months – 5% of tax due at that date
In addition to the penalties stated above, you will have to pay 3% interest on any overdue taxes until your bill is paid in full.
Insufficient funds to pay your tax bill?
If you are unable to pay your tax bill in full by the payment deadline, you should contact HMRC’s Business Payment Support Service as soon as possible to explain the situation and ask if you can set up a payment plan.
It’s not unusual for people to experience genuine and unavoidable financial difficulties, so HMRC are known to be very understanding and accommodating in such situations.
As long as you are honest and keep communications open, rather than simply ignoring the issue, you should be able to resolve the situation without facing any financial penalties (other than a little bit of interest, in most cases).
For further information and advice, please refer to HMRC’s guide to Self Assessment deadlines and penalties.
Value Added Tax (VAT)
HMRC issues increasingly strict penalties for VAT-registered businesses that miss multiple deadlines. Your VAT return and payment deadlines can be found in your VAT online account.
The deadlines usually fall on the same day, which is 1 calendar month and 7 days after the end of each VAT accounting period. However, they may be different if you have registered for the VAT Annual Accounting Scheme, for example.
You will enter a 12-month ‘surcharge period’ if you default by missing a filing deadline or failing to pay the VAT you owe by the due date. HMRC will send a letter to your registered office or business address explaining any surcharges you owe and what will happen if you default again.
Should you default again during a surcharge period:
- The surcharge period will be extended for a further 12 months.
- You may have to pay an extra amount (‘surcharge’) in addition to the VAT you owe.
A surcharge is worked out as a percentage of the outstanding VAT on the due date for the default accounting period. As shown below, the surcharge rate increases each time you default again in a surcharge period. However, you won’t have to pay anything extra for your first default.
|Defaults within 12 months||Surcharge if annual turnover is below £150,000||Surcharge if annual turnover is £150,000 or more|
|2nd||No surcharge||2% (no surcharge if this is less than £400)|
|3rd||2% (no surcharge if this is less than £400)||5% (no surcharge if this is less than £400)|
|4th||5% (no surcharge if this is less than £400)||10% or £30 (whichever is more)|
|5th||10% or £30 (whichever is more)||15% or £30 (whichever is more)|
|6 or more times||15% or £30 (whichever is more)||15% or £30 (whichever is more)|
HMRC will not impose a surcharge if you submit a late VAT return under the following circumstances:
- You pay your VAT in full by the due date.
- You don’t have any VAT to pay.
- You are due a VAT repayment.
You may receive a penalty of up to:
- 100% of any tax under-stated or over-claimed if you send a VAT return that contains a careless or deliberate inaccuracy.
- 30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days.
- £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online.
HMRC imposes Corporation Tax penalties for late filing of annual Company Tax Returns (which must include full annual accounts) and late payment of the Corporation tax owed by your limited company. The penalties increase over time, as outlined below.
Late filing of Company Tax Return & Annual Accounts
- 1 day late – automatic £100 penalty
- 3 months late – £100 penalty
- 6 months – 10% penalty added to estimated tax bill
- 12 months – 10% penalty added to estimated tax bill
The deadline for delivering your tax return and full statutory accounts is 12 months after the end of your company’s Corporation Tax accounting period.
Late payment of Corporation Tax
- 3% of any outstanding tax payments
The deadline for paying all Corporation Tax owed by your company is 9 months and 1 day after the end of your Corporation Tax accounting period.
Construction Industry Scheme
Contractors working under the Construction Industry Scheme (CIS) will face additional penalties if they miss the deadline for submitting their CIS returns:
- 1 day late – automatic £100 penalty
- 2 months late – £200 penalty
- 6 months late – £300 penalty or 5% of CIS deductions (whichever is greater)
- 12 months late – £300 penalty or 5% of CIS deductions (whichever is greater)
Companies House penalties
Companies House reporting only applies to limited companies and Limited Liability Partnerships. If you are a company director or secretary, or one of the designated members of an LLP, it is your responsibility to ensure the business meets its statutory deadlines to avoid the significant penalties outlined below.
Whether you are responsible for an active or dormant company limited by shares, company limited by guarantee or LLP, failure to prepare and deliver annual financial accounts (full, abbreviated or dormant) can lead to the following penalties being imposed by Companies House:
|Time after deadline||Penalty|
|No more than 1 month||£150|
|More than 1 month but not more than 3 months||£375|
|More than 3 months but not more than 6 months||£750|
|More than 6 months||£1500|
Should your accounts be delivered late 2 years in a row, the penalty is automatically doubled.
Your company’s first accounts after incorporation should be delivered to Companies House no later than 21 months after the date of your company’s registration (i.e. the ‘date of incorporation’).
Each year thereafter, your accounts should reach Companies House no later than 9 months after your accounting reference date (ARD), which is the end of your company’s financial year.
Confirmation Statement (previously the ‘Annual Return’)
Companies House will not impose any automatic financial penalties if your confirmation statement is delivered after the filing deadline. However, your company is liable to be struck off from the register, your credit rating may be affected, and the directors may otherwise be prosecuted.
Appealing against late filing penalties
You must be able to prove that your failure to submit accounts resulted from exceptional circumstances beyond your control, such as fire, flooding, theft, death or severe illness. Companies House will not accept the following reasons for late submission of accounts or penalty payments:
- You forgot
- The company is dormant
- You cannot afford to pay a penalty already imposed
- Failure was the fault of your accountant or other nominated individual
- You did not know how or when to file your accounts
- Your accounts were delayed or lost in the post
- The director lives or was travelling overseas at the time
To appeal against a late filing penalty, you must send a letter to the address stated on the front page of the penalty invoice. Alternatively, you can send an email, stating the the penalty reference, to: firstname.lastname@example.org
You should receive a response within 10 working days. The penalty will not be collected while your appeal is pending.
If your appeal is rejected, you can write to the Senior Casework Unit (SCU) in the Late Filing Penalties Department at the Companies House office that deals with your account.
Should your appeal be rejected by the SCU, you can write to the Independent Adjudicators and request that your case be reviewed.