HMRC estimates that almost 7% of those required to submit a 2012/13 tax return missed the 31 January 2014 online filing deadline. Most are aware of the £100 penalty for missing this date. However, few are aware that this penalty can quickly rise to £1,300 or more within a few months.

Accumulating charges

In addition to the £100 penalty, those who file their tax return late risk being hit by up to 90 daily penalties, at £10 a day, from 1 May. If the return has not been submitted by 31 July, there is a further penalty of the higher of £300 or 5% of the tax liability shown on the return, which means that the costs can soon add up. As well as penalties, there is interest on any tax not paid by 31 January and further penalties for tax paid after 30 days or more. So doing nothing or delaying matters can prove very expensive.

The child benefit tax trap

An additional problem for 2013 is that some taxpayers with income over £50,000 who haven't had to file a tax return before may now need to if they, or their partner, have received child benefit. This can apply even where the child is not their own, e.g. from a partner's previous relationship.

The charge came into effect for child benefit entitlement on 7 January 2013. As an example, if the child benefit received from 7 January to 5 April 2013 was £243 and the income of the partner with the higher income was between £50,000 and £60,000 for the year, part of the £243 would be clawed back in tax. If the income of the partner with the higher income was over £60,000 then the full £243 would be recouped as additional tax.

All bad news?

There are cases where a tax refund may be due. This can arise due to overpayments of PAYE, expenses claimable against tax or tax relief for gift aid charitable donations, pensions or trading losses. Reliefs are also available for tax-efficient investments. In addition, HMRC may accept a 'reasonable excuse' for missing a deadline.

The most important thing is to take action. Speak to HMRC as soon as possible and, ideally, get your tax return submitted and pay any tax owed immediately to minimise further penalties.

Common questions

1. I've not submitted my tax return - can I wait until HMRC contacts me? No, the onus is on you to inform HMRC if tax is due.

2. What if I don't know if my partner has claimed child benefit or if they earn more than me? You can ask HMRC for limited information about your partner's finances.

3. I've heard the penalty is capped at the tax due, so if I paid all my tax by 31 January 2014, the penalty reduces to nil? No, that old rule no longer applies.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.