Failing to keep on top of your accounts will not only lead to inevitable loss in revenue, but you will also build up substantial penalties from HMRC, so keeping these matters in hand will be vital to keeping your business running.
You have to be aware of your legal requirements, especially regarding accurate timekeeping by completing the necessary paperwork, returns and payments on time.
Penalties for late self-assessment submissions
Anyone that has registered as self-employed is required to complete a self-assessment tax form annually, and submit them before the registered deadline.
Paper tax returns must be submitted before midnight on 31st October, while online submissions are required before midnight on 31st January.
It is worth preparing for these deadlines well ahead of time, as submitting the forms even one day late will incur penalties, while longer delays will attract more substantial fines:
Period from missed deadline |
Fine |
| Less than 3 months | £100 |
| 3-6 months | £100 + 5% of tax due, or £300 (whichever is largest) |
| 6-12 months | £100 + 5% or £300 + a further 5% or £300 |
HMRC is able to demand up to 100% of the tax due, meaning that you could put yourself in a position where you owe more than double the amount of tax that you initially owed.
Unpaid self-assessment tax
There are also additional charges for not paying the tax due by midnight on 31st January each year. These will incur interest until the amount is paid:
Period from missed deadline |
Interest |
| 28th February | 5% of tax owed |
| 31st July | 5% + a further 5% |
Limited company corporation tax penalties
If you are running a company that is required to pay Corporation Tax, you must submit these liabilities to HMRC within 12 months of the end of your liability period.
Fines will also be incurred if you fail to deliver a return by the date specified to you.
If you communicate with HMRC and they consider you to have a reasonable excuse, they may reduce your penalty.
On the other hand if your actions are deemed to be deliberate and serious, especially if they believe you have attempted to conceal your error, they are able to charge 100% of your tax penalty.
Late company accounts submission fines
Another requirement for limited companies is that you must submit your end of year accounts.
The first submission is needed 21 months after you first registered with Companies House, and annual submissions are required after that point, within 9 months of the end of your company’s financial year.
The penalties incurred if you fail to do so are as follows:
Period from missed deadline |
Fine for a Private Company |
Fine for a Public Company |
| Less than 1 month | £150 | £750 |
| 1-3 months | £375 | £1,500 |
| 3-6 months | £750 | £3,000 |
| More than 6 months | £1,500 | £7,500 |
If you file accounts late for a second consecutive year, the fine will double in the second year.
Furthermore, if you are 2 months late submitting your end of year accounts, Companies House will submit a petition to strike off your company, and this will be posted in the Gazette Official Public Record.
You are then given a further 2 months to resolve the situation before your business will be officially struck off and become forcibly liquidised – you will therefore be required to cease company trading.
Even if you are able to submit the accounts and discontinue the petition to strike your company off the register, the action will be recorded publicly for the rest of the company’s life.
It is clearly imperative that you avoid these penalties at all costs.
How should you avoid these steps being taken?
Any decision to fine you or your company can be appealed, but an attempt will only be successful if you are able to prove that you had an excuse that is deemed reasonable for late filing or payment.
In some cases, it may be possible to avoid the fines by showing HMRC that you took reasonable care and that the error was just a mistake. In the first instance, a fine may be avoided.
Obviously, however, the best way to avoid facing financial penalties is to ensure that your records are up to date and submit all of the relevant paperwork in plenty of time.
Legal deadlines cannot be missed if you want to make sure that cash remains flowing and your company doesn’t leave you with significant personal financial difficulties.
If your company has accrued late filing fees and you’re unsure how to move forward, give us a call now for some non-obligation advice.
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