Data obtained by the Tax Policy Associates (following a Freedom of Information Act request) shows that the burden of fines issued to those who have failed to file a tax return is being met by those who have no tax to pay. Currently, anyone who earns less than £12,570 does not pay income tax.
In the 2021-22 tax year, over 83,000 people earning less than the threshold were issued with a £100 penalty by HMRC, of which 17,000 were cancelled on appeal. For context, only 20,000 people earning £100,000 or more were penalised.
The data for those receiving a £300 fine for filing the return over 12 months late is even more stark. Half of all the 61,000 fines were to people who earn too little to pay tax. Some 12,000 were successful on appeal. Only 5,000 people earning more than £100,000 a year were fined.
The Tax Policy Associates thinktank has raised concerns about the extent to which people who are vulnerable or facing financial hardship are being issued with the penalties for failing to submit a self-assessment tax form on time, which self-employed workers must do.
The thinktank is now suggesting HMRC reverts to the old fines system, in which anyone who did not pay any tax was effectively spared a fine. “It’s shameful that tens of thousands of people on very low incomes, often with difficult lives, have their lives made more difficult by HMRC penalties,” said Dan Neidle, the founder of TPA. “We should go back to how things were before 2010: nobody should have to pay a penalty if their income is too low for them to have a tax bill.”
