HMRC Penalties for the Self-Employed Explained
Although everybody tries to avoid it, sometimes the self-employed can end up getting a
penalty from HMRC. The penalties can be pricey and demanding, but thankfully they can
sometimes be appealed. If you have a rational excuse, your penalty may be changed or
Furthermore, by making yourself aware of how these penalties could occur, you will be less
likely to receive one as you will know the deadlines things need to be done or submitted by.
In this article, we will discuss the different penalties, as well as how to avoid them.
How Could I Get An HMRC Tax Penalty?
The main reasons HMRC might issue a penalty are:
Filing a late tax return
A late payment
Errors on your return
Failing to keep necessary records
How Could I Avoid These?
To minimise the chance of receiving a penalty fine, it is important to stay on top of dates
and understand what penalties there are.
Self-Assessment - For example, you must register for Self-Assessment by the 5th of October. Even missing the deadline by one day could get you a £100 fine, and every day that you build up beyond the deadline date will increase your fine.
Tax return - The deadline for filing your tax return is 31 st October for paper forms, or 31 st January for online returns. Similarly to Self-Assessment, filing your tax return one day past the deadline date means a £100 fine. This rises to £200 after 3 months if your tax return still hasn’t been filed.
‘Failure to notify’ penalty – If you haven’t declared income that you owe tax on, HMRC can issue a penalty and charge interest on the amount you owe. For instance, this could be related to a new source of taxable income. This is known as a ‘failure to notify’ penalty. The cost of the penalty will depend on the amount of unpaid tax that resulted from failing to notify.
Inaccuracies – If you make a mistake on your tax return, it is possible to amend it within a certain time period after filing it. However, HMRC can issue penalties for inaccuracies that came about from carelessness, or deliberately trying to hide your tax liability.
In recent months, HMRC has introduced a point-based penalty system, with the aim to
punish repeat offenders, but also be more flexible towards those who make the odd
mistake. By April 2025, this system would have fully rolled out to people of all tax
What Are Some Reasonable Excuses?
In terms of appealing a penalty you have incurred, HMRC has a list of what they deem ‘a
reasonable excuse’ for late filing or payment. Some of these excuses include…
A close relative passed away shortly before the deadline date.
If you suffer from a ‘serious’ or life-threatening illness.
You were unexpectedly in hospital around the time you were due to meet the deadline.
The software you use failing or glitching just before the deadline (if it was out of your control).
Fire, flood or theft that was disrupted your completing your return on time.
HMRC technical issues, such as their online portal going down.
Keep in mind though, HMRC will still want evidence that you have taken every possible care
to meet your tax obligations.
How Can I Appeal?
The appeal process will vary depending on which penalty you’ve received. Ensure to appeal
within 30 days of the penalty notice if you can.
To appeal a Self-Assessment penalty – You need to have either filed your return or contacted HMRC to let them know that you don’t need to complete one. If the penalty is from the tax year 2016-17 or later, use the online Self-Assessment portal. If it is from earlier on or doing it via post is more convenient for you, download the SA370 form and send the completed form to HMRC.
To appeal a tax or VAT late filing penalty – Use your HMRC online account. If you disagree with the result of your appeal, you can make a further appeal to the tax tribunal. They will take evidence from both parties and then make their own decision. If you want to do this, you must do it within 30 days of the review decision.
Thank you for reading our article on HMRC penalties. We hope you feel better informed
about the penalties and that you confidently know how to avoid them or appeal them.