Taxpayers who failed to submit their self-assessment tax returns and pay their tax bill by the 31 January deadline are being reminded that interest on overdue payments continues to accrue. While HM Revenue & Customs (HMRC) provided a one-month grace period, extending the deadline for late filing penalties until 29 February, this leniency does not extend to the interest charged on unpaid tax, as highlighted by MoneySavingExpert.com.
The standard deadline for filing online self-assessment tax returns for the 2022-23 tax year was 31 January 2024. Simultaneously, the full payment of any tax due for that period was also expected by this date. For those who missed this crucial deadline, interest began to be applied to any outstanding tax from 1 February. The current interest rate for overdue tax is 7.75%, a figure that has seen several increases over the past year in line with the Bank of England's base rate changes.
This means that individuals who have not yet settled their tax liabilities are seeing their debt grow daily. Even if a taxpayer has since filed their return within the penalty grace period, or is in the process of setting up a payment plan with HMRC, the interest will continue to be charged on the unpaid amount until it is fully cleared. The purpose of this interest is to compensate the Exchequer for the delayed receipt of tax revenue.
HMRC encourages anyone struggling to pay their tax bill to contact them as soon as possible to discuss potential 'Time to Pay' arrangements. These plans allow taxpayers to spread their payments over an agreed period, typically up to 12 months. However, it is crucial to understand that even with such an agreement in place, interest will still be added to the outstanding balance until the debt is fully settled. Ignoring the issue can lead to escalating costs, including further penalties for continued non-payment.
The advice from MoneySavingExpert.com underscores the importance of prompt action for those with outstanding self-assessment tax. Paying the amount due as quickly as possible is the most effective way to minimise the total interest charged, thereby reducing the overall cost of the late payment. Understanding the distinction between late filing penalties and late payment interest is key for taxpayers navigating the self-assessment system.
Source: Money Saving Expert