UK taxpayers face increased penalties for late tax returns

Taxpayers in the UK are facing tougher fines for late tax returns. Chancellor Rachel Reeves announced these changes as part of a plan to increase tax collection. The government expects to raise £1 billion a year from these new penalties, which critics say will mostly impact small businesses and self-employed individuals. Last year, over 1.1 million people missed the self-assessment deadline set by HMRC. Under the new rules, anyone who is late by 15 days will get a 3% fine on their unpaid tax. If they are more than 30 days late, the fine increases to 10%. These penalties come at a time when many people are already struggling with rising living costs. Currently, the fines for late filings are lower. You pay a 2% penalty after 15 days and 4% after 30 days. The updated penalties will soon include a 6% fine after 30 days and a 10% fine after 31 days. These new rules will start affecting VAT taxpayers in April 2025 and self-employed income tax filers in 2026. In addition to fines, the government plans to spend £80 million to improve debt collection. They will hire third-party agencies to recover £1.3 billion over the next five years. HMRC is also increasing its staff by 600 and investing £100 million in compliance officers. Automation is a key part of the plan, with a focus on data tracking and AI to identify taxpayers who owe money. While the Treasury argues these measures will close the tax gap, many feel that small earners will be unfairly punished. In contrast, large corporations often use legal loopholes to reduce their tax responsibilities. HMRC says the new penalty system aims to make tax compliance easier and to protect public finances.