A total of 46,266 penalties were withdrawn in the tax year to April 2024 after being issued to people who either owed no tax or missed deadlines due to reasons beyond their control
Tens of thousands of taxpayers may have been wrongly fined by HMRC, and many Brits could be in line for refunds after a record number of penalties were cancelled last year. A significant 46,266 fines were withdrawn over the course of just 12 months, having been issued to individuals who either didn’t owe any tax or missed deadlines due to circumstances beyond their control.
These figures, published in HMRC’s most recent statements, show a 29 per cent surge in annulled penalties compared to the previous year. Now, experts are calling on people to contest fines they reckon are unjust. Taxpayers can be served an automatic £100 fine for failing to meet the self-assessment deadline, while businesses can be penalised for tardy VAT returns.
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However, a wave of successful appeals has been seen following challenges made through HMRC’s online system, which underwent an overhaul in early 2023 to simplify the appeal process, reports the Express.
Yet Andrew Park, a tax partner at accountancy firm Price Bailey, warns that the issue is much more pervasive, with numerous fines being set off by banking delays, administrative errors within HMRC, and chronic customer service shortcomings.
“Late filing penalties are disproportionately levied on people on low incomes, many of whom have no tax to pay,” he disclosed to the Telegraph.
It has also come to light that over the past five years, 600,000 penalties have been meted out to individuals earning below the £12,570 personal allowance, indicating they had zero tax liability to begin with. After obtaining this data through a Freedom of Information request, the thinktank Tax Policy Associates has called for the abolition of such penalties.
HMRC’s helpline has also been criticised. In the first half of 2024-25, the tax authority left 35% of calls unanswered, falling short of its 85% target. Despite drafting in more call handlers to improve the situation, scores of taxpayers are still struggling to get assistance prior to the filing deadline.
HMRC issued a staggering nine million penalties on taxpayers last year, a jump from just over eight million the previous year.
Park says millions could be paying penalties needlessly: “When two-thirds of appealed penalties are overturned, yet only a small fraction of the nine million issued are challenged, it suggests a significant number of taxpayers may be paying penalties they could successfully contest.”
A revised points-based penalty system introduced under the Making Tax Digital initiative is set to give self-employed individuals using digital system relief from the automatic £100 fine. Instead, self-employed taxpayers will accrue penalty points with a maximum £200 cap per return.
Those not covered by Making Tax Digital – including numerous low-income earners – remain subject to the more unforgiving legacy system.
An HMRC spokesperson defended their position: “Our penalty reforms enable customers to appeal easily and quickly online against both penalties and penalty points. Our new points-based system means only those who persistently miss deadlines will incur a financial penalty.”
Taxpayers who reckon they’ve been unjustly fined have a 30-day window from the date on the penalty notice to lodge an appeal. Those who no longer need to file a return must inform HMRC prior to January 31 to dodge a fine.
What to do if you’ve been fined
- Check if you actually owed tax – if not, your fine may be challengeable.
- Appeal online via your HMRC account within 30 days.
- If you’re self-employed and not in Making Tax Digital, be aware you’re still under the old regime.
- Contact HMRC if you believe you were wrongly issued a return request.