HMRC has obtained new data from PensionBee and it has revealed a worrying trend about self-employed workers’ tax returns.

The pension company found that those on lower incomes are twice as likely to miss the Self-Assessment filing deadline compared to higher earners.

Their Freedom of Information (FoI) request stated that 5.9 per cent of self-employed individuals earning below the basic rate tax threshold filed their 2023-24 tax return late.

This is in comparison to the rate falling to 3.1 per cent for basic rate taxpayers, 2.7 per cent for higher rate taxpayers and 2.6 per cent for additional rate taxpayers.

It might be that taxpayers are struggling to manage their responsibilities or have a lack of knowledge about the deadlines. Either way, they need to be clear about the risks of filing late and how to stay compliant.

Why are lower earners more likely to file late?

Managing your taxes without help can be overwhelming for self-employed workers.

Freelancers or sole traders are responsible for tracking income, expenses, deadlines and payments themselves, unlike employees on PAYE.

Lower earners are also more likely to experience irregular income and cash flow pressures, so filing late may be due to financial strain.

PensionBee’s research also highlighted a lack of awareness around tax and financial planning.

Nearly three in four self-employed individuals without a pension were unaware that pension contributions receive tax relief.

The risks of filing your tax return late

The costs can soon add up if you miss the Self-Assessment filing deadline and HMRC will not always be lenient. They will apply penalties even if no tax is owed.

This is why you need to comply with either the deadline for Self-Assessment paper tax returns on 31 October or the deadline for online tax returns on 31 January.

If you fail to do so, you could be facing:

  • An automatic £100 penalty for missing the filing deadline
  • Daily penalties of £10 per day after three months (up to £900)
  • A further penalty of 5 per cent of the tax due or £300 after six months, whichever is greater 
  • Another 5 per cent or £300 charge after twelve months, whichever is greater 

Late filing often means late payments and this can lead to further penalties and interest charges. These charges can quickly rise and debts can start snowballing if you don’t resolve them.

Filing late also creates stress and uncertainty for you. An uncompleted tax return will make it harder to budget accordingly, plan cash flow or prepare for future liabilities.

Many business owners also underestimate the time involved in resolving issues with HMRC once penalties arise.

Your day can easily be taken up with appeals and managing payment plans and this will take time away from running your business.

Let us keep you on track

We want to keep your business compliant and reduce the stress around tax returns.

Our team can help you maintain accurate financial records and identify any allowable expenses or tax reliefs you can claim to reduce your tax liabilities.

We can also help you submit your Self-Assessment tax return on time and steer you clear of any costly errors or penalties.

It might be that you are struggling to pay your tax bill, and if so, we can help communicate with HMRC on your behalf to create a plan.

We want you to get support as early as possible, so you know your options from the get-go and can prevent penalties or charges from rising.

For further support or advice on filing your tax return, get in touch.