In September 2021 HMRC announced a new system they are implementing to deal with anyone that submits their VAT or tax returns late.
This new approach is designed to harmonise processes across different types of tax payments and to incorporate Making Tax Digital.
It is anticipated that most people that are compliant most of the time are not treated in the same way as those that are less compliant most of the time.
Who will be affected by this change?
This system will apply to:
- Individuals that have to submit a self-assessment tax return
- Self-employed businesses that submit a self-assessment tax return
- Businesses that are VAT registered
- Property investors and landlords
Which taxes are included?
This new system will be put into place to deal with late submission and payment for VAT returns as well as Income Tax Self-Assessment (ITSA).
When will this change be in operation?
Penalty Reform will replace existing penalties and will be implemented from:
- VAT taxpayers for accounting periods beginning on or after 1 April 2022
- ITSA customers with business or property income over £10,000 per year from the tax year beginning 6 April 2024.
- All other ITSA customers from the tax year beginning 6 April 2025
What are the penalty charges?
The table below shows the approach and level of the penalty based on the number of days the payment is late.
Although it seems like there is a lot of time before this change is implemented, we suggest that you start to look at putting processes in place to ensure that your tax returns and VAT payments are made on time. If you would like any advice, please do contact us by calling 01623 490 120 or email