Due to cash flow difficulties I have not yet paid my self-assessment payment on account, which was due on 31 July 2018. I realise that I will have to pay interest on the amount outstanding, but will I also have to pay a penalty?
A. As you correctly say, HMRC will charge interest on the overdue amount. The charges will accrue from the due date of payment (31 July 2018) to the date the payment is made. The interest rate for late paid tax was increased on 21 August 2018 from 3.00% to 3.25%.
With regards to penalties, you will only be charged if your balancing payment (due 31 January 2019) is late. The penalties for late payment under self-assessment are as follows:
- 30 days late: 5% of the unpaid tax
- 6 months late: additional 5% of the unpaid tax
- 12 months late: additional 5% of the unpaid tax.
HMRC may reduce a late payment penalty in ‘special circumstances’, which does not include inability to pay. In addition, a defence of ‘reasonable excuse’ may be available.
In relation to payments on account, the maximum penalty for fraudulent or negligent claims by taxpayers to reduce payments on account is the difference between the correct amount payable on account and the amount of any payment on account made.