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Freelancers! Beware of self-assessment penalties

freelancesupermarket.com newsroom

RSS 02 April 2011
HMRC wants everybody to file their tax returns on time and to encourage them to do so the Revenue is introducing tough new penalties for late filing.

Freelancers who file Self Assessment tax returns will receive their 2010/11 notices shortly and information on the new penalty framework will be included.

Stephen Banyard from HMRC explained that although most people file their returns on or before the deadline, the £100 penalty was not a large enough deterrent to stop a small minority filing late. The new regime will see penalties increase over time, so the later you file, the greater the fine.

Taxpayers who miss the filing deadline will automatically be charged an initial £100 penalty. This fine will be imposed even if you do not owe any tax. If a return is unfiled after three months, a further penalty of £10 per day will be levied. Returns that are six months late will attract a £300 fine or 5% of the tax owed depending on which sum is larger. Tax payers who have not filed their return after 12 months face the possibility of a fine of up to the total amount of the tax due.

In addition to penalties for late filing, there are also fines for late payment. If you settle your outstanding tax liability 30 days late, you will receive a 5% penalty on the amount due. 6 months late and a further 5% fine will be levied and after 12 months, another 5% will be added to your bill. HMRC also charges interest on overdue payments and penalties.

In related news, the OTS has suggested simplifying the way small businesses complete their annual tax returns. If the Chancellor implements the proposal, there would be a flat tax on takings minus a fixed allowance for expenses. This would mean freelancers would have less paperwork to complete and they would enjoy one of the simplest tax systems in the world.

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Image: Alarm Clock 2 by alancleaver_2000

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