HMRC cancels over 40,000 tax penalties – could yours be waived too?
- TBA
- Sep 2
- 4 min read
Updated: Sep 3
According to HMRC’s latest annual report, a record 46,266 tax penalties were cancelled in the past year. These penalties were originally issued for late filing, but in many cases the taxpayers involved did not actually owe any tax.
Automatic late filing penalties can be appealed
In the UK, if you miss the filing deadline for Self Assessment or VAT returns, both individuals and businesses are automatically issued with a penalty notice.
However, penalties can be appealed if the late submission was not the taxpayer’s fault or if HMRC incorrectly required the person to file a return.
There are several reasons why taxpayers may submit late, including:
Delays in bank transfers
HMRC’s own administrative errors
Poor customer service response times
In fact, in the first half of the 2024/25 tax year, HMRC failed to answer 35% of phone calls, far below its 85% target. Although service levels have since improved, the problem has not been fully resolved.
A significant number of cancelled penalties were issued to individuals who did not actually need to pay tax. Lower-income taxpayers are disproportionately affected.
Over the past five years, 600,000 penalties were issued to people whose income was below the Personal Allowance of £12,570.
How to appeal a late filing penalty
Last year, HMRC issued nine million penalties, up from just over eight million the year before. However, with the introduction of Making Tax Digital (MTD), a new points-based system has been put in place:
For Self Assessment, missing the filing deadline results in an automatic £100 fine, with further penalties increasing over time.
For VAT, businesses accumulate penalty points for late returns. Once they reach the threshold set for their accounting period, they are fined £200.
Yet many taxpayers are unaware that these penalties can be appealed.
Analysts note that up to two-thirds of penalty appeals could be successful, but only a small proportion of taxpayers actually appeal each year – meaning many pay unnecessarily.
According to HMRC, if you no longer need to file a tax return, you should inform them before the 31 January deadline.
If you believe you were wrongly fined, you can appeal within 30 days of the penalty notice being issued.
Self Assessment filing requirements
You need to file a Self Assessment tax return if you meet any of the following criteria:
You earned more than £1,000 from self-employment (excluding the trading allowance).
You received income from rental property, investments, capital gains or overseas earnings.
Your annual income exceeded £150,000.
You need to repay Child Benefit through the High Income Child Benefit Charge, or for other repayment purposes.
Although the government has proposed raising the threshold for reporting income from additional jobs from £1,000 to £3,000 – potentially exempting around 300,000 people from filing – this change has not yet taken effect.
Until it does, the current £1,000 threshold still applies.
Key filing dates and deadlines
Your 2024/25 Self Assessment return will cover the period from 6 April 2024 to 5 April 2025.
First-time filers must register with HMRC by 5 October 2025. Registration will provide you with a UTR (Unique Taxpayer Reference) and activation code.
Paper returns must be submitted by 31 October 2025.
Online returns must be submitted by 31 January 2026.
Penalties for late filing
Missing the deadline triggers an automatic £100 penalty.
After three months, an additional £10 per day applies (up to £900).
Further penalties and interest can take the total above £200.
If you were wrongly required to submit a return, you may appeal within 30 days.
HMRC also recommends informing them before 31 January if you no longer need to file, to avoid unnecessary fines.
Tax reliefs and allowances you can claim
Personal Allowance & tax rates
Personal Allowance: £12,570 per tax year
Basic rate 20%: £12,571 – £50,270
Higher rate 40%: £50,271 – £125,140
Additional rate 45%: £125,141+
The Personal Allowance reduces once income exceeds £100,000 and disappears completely at £125,140.
Trading allowance
Up to £1,000 of non-PAYE income per year can be earned tax-free (applies to self-employment or casual income). If total non-PAYE income does not exceed £1,000, there is no need to report or pay tax on it.
Work-related expense deductions
You may claim either £6 per week for working from home or actual expenses such as phone and electricity bills. Other allowable expenses include professional subscriptions, business travel costs, and equipment necessary for your work.
Some advice from TB Accountants
Within the UK tax system, Self Assessment is not simply about filing on time. It can determine whether you pay unnecessary tax, reclaim what you are owed, or avoid being unfairly penalised by HMRC.
If you are self-employed, considering taking an additional job or work on the side, or are already running a business, managing your Self Assessment correctly is the first step towards avoiding unnecessary fines.
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