Self Assessment penalties – everything you need to know

Filing a Self Assessment tax return can be complicated, and doing it late or incorrectly can incur penalties. Some of these penalties can be costly, which could upset your business cash flow. 

In this article, we cover everything you need to know about Self Assessment penalties. We also discuss the reasons why you might get penalised and what it could cost you, as well as how to dispute a penalty.

Top Tip: Before we dive into the details of penalties, it may be helpful to review the ins and outs of small business taxes. Learn how they work and what taxes apply to your business in our guide to small business tax ⚡️

Table of Contents

• What are the current Self Assessment penalties?
• Changes to Self Assessment penalties
• Leveraging Tide for your Self Assessment

What are the current Self Assessment penalties?

If you miss a payment or submit the wrong tax information, you will likely incur a self assessment late filing penalty. Make sure to take note of the key tax dates for 2024 to avoid missing a payment.

The current deadlines for Self Assessment are as follows:

• 31st October — filing deadline for paper tax returns 
• 31st January — filing deadline for online tax returns
• 31st January — deadline for paying the tax you owe

Self assessment late filing penalties

Remember, you will be penalised for filing your Self Assessment tax return late, even if you don’t owe any tax. 

The table below outlines the costs of missing these deadlines:

Learn more about late filing penalties on Gov.uk.

Self assessment late payment penalties

Penalties for late payment only apply if you owe tax. If you miss the deadline for paying your tax liabilities, HMRC will charge you interest on the amount due. The charge is automatic and begins accruing as soon as you miss the deadline. 

Charges are applied at 30 days, 6 months and 12 months after the tax payment due date. The table below shows the costs and when they’re accrued.

Penalties for errors in Self Assessment tax return

HMRC may penalise you for errors on returns or other paperwork that misstate or underestimate what you owe in taxes. You can also be penalised if you receive an incorrect assessment from HMRC and fail to correct the error.

The penalty incurred depends on the type of behaviour cited and the assessment of taxpayer culpability. HMRC sorts behaviours they consider into the following categories:

1. Genuine error – You took reasonable care to correctly report your income and taxes (for example, if you submitted the wrong form but filled it out correctly).
2. Error due to negligence – A mistake resulted from failure to take reasonable care to report or pay taxes.
3. Deliberate errors – You made a mistake on purpose but did not attempt to hide it.
4. Concealed deliberate error – You made a deliberate error and made arrangements to conceal the mistake.

Charges also depend on whether you come forward to disclose the error yourself.

• Unprompted disclosure means you communicate the errors before HMRC send you a penalty notice or start an enquiry into your records.
• Prompted disclosure means HMRC has started an enquiry into your records and contacted you about an error.

Once it determines behaviour and culpability, HMRC calculates costs as a percentage of potential lost revenue (PLR) or the amount of tax you still need to pay once the error has been corrected. The table below outlines the range of errors and the penalties. 

Learn more about filing error penalties on Gov.uk.

Failure to notify or register penalties

Finally, HMRC may penalise you for failing to register for Self Assessment or to notify HMRC of any changes that affect your tax liability.

If you’re eligible to register for Self Assessment, you must do so by the assigned deadline (currently 5th October). 

If you fail to notify HMRC about anything affecting what you owe in taxes, you can be hit with what’s called a “failure to notify” tax penalty. This applies to things like a new source of income that’s subject to tax or any capital gains you realise during the tax year (including offshore). 

As with errors, failure to notify penalties take into account potential lost revenue. And the fines depend on whether your disclosure of the information is prompted or unprompted. The following table outlines the costs of failure to notify penalties.

Learn more about failure to notify penalties at Gov.uk.

Self assessment penalty appeal

If you feel that your self assessment penalty was wrongly calculated, or that there was a reason you couldn’t pay it, then it is possible to file a self assessment penalty appeal. HMRC refers to reasons that you couldn’t pay as ‘reasonable excuses’:

These reasons could be if:

• HMRC provided incorrect information, or didn’t notify you at all
• You were hit by a serious illness, or other difficult personal circumstance
• You made an honest attempt to pay, but a technical error prevented you
• Bank errors or postal delays/misplacement

You can appeal your self assessment penalty on the Gov.uk website within 30 days of the penalty notice being sent to you, and can also appeal by post. Once you submit your appeal, an HMRC officer not involved in the original penalty will investigate it. The investigation will usually take 45 days. In the meantime, you don’t need to pay the fines and won’t face any further penalties until the appeal has been settled.

You can make a second appeal if you still think the decision was wrong. This can be done via the tax tribunal at Gov.uk.

Alternatively, if your tax appeal didn’t succeed through HMRC, you can apply for alternative dispute resolution (ADR). In ADR, you avoid a court hearing by having an impartial third party mediate between you and HMRC. You, or your agent or tax advisor, can use an online form to apply.

Changes to Self Assessment penalties

The way that Self Assessment penalties are administered is due to be changed by 2026. Following the introduction of a points-based penalty system introduced from the 1st of January 2023, Self Assessment penalties are to be changed to this system in April 2026.

This new system will first apply to self-employed earnings over £50,000, and then after April 2027 to earnings over £30,000.

The penalties for late payments will apply in two stages: a first penalty after 15 days, and then a second penalty after 30 days.

The penalty will then accrue after this date until it is paid:

There will also be a points system introduced. One point will be received each time the taxpayer misses a payment date, and once the threshold has been surpassed, a fine of £200 will be applied, and then reapplied for each subsequent missed submission.

The new Self Assessment points system will work as follows:

You can read about the proposed changes on the Gov.uk website.

Leveraging Tide for your Self Assessment

Maintaining good control of your accounting is crucial when it comes to avoiding Self Assessment penalties.

Tide has all the tools you need to operate your business smoothly. Our free business bank account allows you to handle all of your business transactions, and our accounting software will help you keep track of everything.

Key information to remember:

• 5 October – Register for Self Assessment
• 31 October – File paper tax return
• 31 January – File online tax return 
• 31 January – Pay your tax bill

The documents you’ll want to have on hand include:

• Bank statements 
• P60 or any other records of income you’ve already paid taxes on (if you’re also employed)
• Invoices you issued
• Records of expenses relating to your small business or self-employment
• Receipts of charitable contributions 
• Records of pensions 

Top Tip: Once you report all your income, you can minimise your tax bill by documenting your allowable expenses⚡️

Learn about the different types of expenses and which you can claim as a small business or self-employed person in our guide to Self Assessment expenses  🔑

Photo by Pavel Danilyuk, published on Pexels