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New Penalty Rules from HMRC

    Did you know that HMRC have begun updating their Penalty Regime?

    With this, these new updates and changes have started affecting your tax submissions from January 2023.

    HMRC are planning to stagger the regime, this will be phased in three stages each depending on the type of tax that you pay;

    • 1 January 2023 for VAT taxpayers.
    • 6 April 2024 for MTD for Income Tax Self Assessment (MTD for ITSA) taxpayers.
    • 6 April 2025 for all other Income Tax Self-Assessment taxpayers.

    This will not apply to other occasional submissions, which will continue to be covered by the current penalty regime for the relevant submission.

    However, if you happen to be VAT registered then these updates and changes do not come into effect until next year but it is still best to be knowledgeable on this ahead of time.

    How will the new Penalty Regime work?

    The Penalty Regime will now operate based on a point system for any late submissions. A point will be given for every missed submission deadline. At a certain threshold of points a penalty of £200 will be charged for that failure and any subsequent failure to submit on time

    The points thresholds are:

    Annual 2 points
    Quarterly 4 points
    Monthly 5 points

    What this means is that a taxpayer filing a quarterly return can miss a submission deadline three times, upon the fourth missed deadline, a £200 penalty will be charged. As well as this, a further £200 is then charged for any subsequent defaults whilst the taxpayer remains at that penalty threshold.

    Penalty points will have a lifetime of two years, after which they will expire. The period is calculated from the month after the month in which the failure occurred.

    Key Points to Consider

    • Submit the return by the due date
    • Late submission penalties will reset after two years.
    • VAT and Income Tax points will be treated separately.

    Here at MoulderAS we would love to help you understand these new changes to the penalty regime. If you have any questions, please do not hesitate to get in touch with us and we will do our best to answer them and put your mind at ease.