The sum of money owed to the UK tax authority in overdue tax bills has risen sharply, suggesting a worsening economic picture.
A freedom of information request released on Monday revealed individuals in self-assessment owed £1.6bn in late tax payments to HM Revenue & Customs so far for the 2017/18 tax year.
The amount is expected eventually to surpass the £1.83bn recorded for the 2016/17 year as more tax returns are submitted, said accountancy firm UHY Hacker Young, which made the request.
The money owed by people who missed the tax payment deadline of 31 January has been rising for the past three years — up from £1.76bn in 2015/16 and £1.65bn the year before.
Taxpayers are finding it ever more difficult to pay their tax bills on time as the UK economy struggles and individuals are squeezed, the accountancy firm said. The record number of self-employed people is also a factor, with those new to the self-assessment system struggling to navigate it and pay on time.
Neela Chauhan, a partner at UHY Hacker Young, said: “The vast majority of taxpayers are fully intending to pay on time. However, they face a lose-lose scenario when they find it hard to do so.
“They could either choose to pay the full amount on time, risking the long-term health of their business or career because of the hit on their cash flow, or accept a potentially hefty fine further down the line.”
People who are 30 days late paying their tax face a fine of five per cent of the total tax owed. If they are six months late, they receive another penalty of five per cent of the tax owed at that date, followed by a further five per cent if they are 12 months late. Since 2018 taxpayers are unable to pay tax using a personal credit card.
The tax authority will not charge penalties if individuals can prove they have a reasonable excuse, such as an unexpected stay in hospital or a close bereavement.
However, the number of late tax payment penalties that were subsequently cancelled fell from 23 per cent in 2015/16 to 22 per cent in 2016/17, the FOI revealed, possibly indicating a less sympathetic HMRC, Ms Chauhan said.
“Many commentators have suggested that HMRC is becoming increasingly aggressive when chasing down debts,” she added. “Taxpayers would like to see the Revenue be more flexible and give them a bit of leeway when managing payments.”
The FOI reflects previous research, published in July. This found the numbers of people fined by HMRC for paying tax late had risen dramatically. Meanwhile, there had been a fall in 30-day late payment fines that were subsequently cancelled.
An HMRC spokesperson said: “We want people to pay on time rather than receive penalties. If customers are unable to pay on time, they may avoid penalties by contacting HMRC as soon as possible and we can discuss whether it might be possible to set up a payment plan.”
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