During the tax year of 2020/21, 1.4 million individuals faced interest charges on outstanding tax payments – marking a 15 per cent surge compared to figures prior to the pandemic.
The information was disclosed following a Freedom of Information request by investment platform, AJ Bell. However, the exact sum of money accrued by HM Revenue & Customs (HMRC) from these late payment penalties was not divulged.
The surge in penalties occurred despite a decrease in the sums many individuals would have owed HMRC, attributable to pandemic-related furloughs and corporate dividend cuts.
An escalation in the number of taxpayers facing penalties is projected, and it’s anticipated that the total number of individuals incurring late payment charges due to missed tax deadlines will continue to rise.
By the tax year 2024/25, the estimated number of people paying dividend tax and Capital Gains Tax is projected to reach 2 million according to HMRC.
This escalation implies a significant likelihood of hundreds of thousands of additional taxpayers being hit by late payment charges, considering the current percentage of those missing the deadlines.
Interest rate hikes on late payments
The news of increasing penalties for late tax payments will likely offer little solace to those affected, especially given the rising interest rates on these charges.
As of 31 May 2023, the interest rates on outstanding tax payments have jumped from 6.75 per cent to 7 per cent.
It’s crucial to bear in mind that future escalations in these interest rates will align with the base rate established by the Bank of England.
The said base rate has soared over the past year as the Government endeavours to curtail inflation, and it’s projected to continue on an upward trajectory in the ensuing months.
This, in effect, signifies an impending rise in late tax payment interest rates. It’s a clear warning for UK taxpayers to ensure their taxes are filed and settled promptly.
Should you require guidance on timely tax return submissions, please get in touch with us.
