Self-employed owed HMRC £1.6bn in late tax payments

Self-employed owed HMRC £1.6bn in late tax payments

Data suggests late tax payments are likely to surpass last year’s £1.8bn owed as UK hits record of self-employed individuals.

Self-employed owed HMRC £1.6bn in late tax payments

Self-employed individuals in the UK owed HMRC £1.6bn in late tax returns last year, a figure that UHY Hacker Young says is expected to rise once more self-assessments for 2017/18 have been reported.

In the past three years, the UK has encountered an increasing amount of late tax payments, rising from £1.65bn in 2014/15 to £1.76bn in 2015/16 and £1.83bn in 2016/17.

The 4% increase is due to taxpayers’ failure to meet deadlines as the UK economy continues to struggle, according to UHY Hacker Young. Self-employed taxpayers want to pay their bills on time but fail to do so due to insufficient funds, often caused by the growing late payment problem.

Neela Chauhan, Partner at UHY Hacker Young said: “The vast majority of taxpayers are fully intending to pay on time. However, they face a lose-lose scenario when they find it hard to do so.” Self-employed tax payers may not have the available cash or have made enough profit to pay their tax bill in the time frame given by HMRC.

In the UK, individuals who fail to comply within the 30 days deadline of HMRC risk being fined 5% of all tax owed. Another 5% penalty of the taxed owed at that date applies if the taxpayer is 6 months late.

“They could either choose to pay the full amount on time, risking the long-term health of their business or career because of the hit on their cashflow, or accept a potentially hefty fine further down the line,” said Chauhan.

Less sympathetic

HMRC has been less sympathetic to late taxpayers over recent years whilst only 22% (£516m of £2.35bn) of outstanding tax was cancelled, compared to 23% (523m of £2.29bn) the previous year. UHY Hacker says HMRC is adopting a more aggressive approach when chasing down debts whilst taxpayers demand a more flexible way of managing payments.

UHY Hacker believes the rising number of late tax payments is also correlated to the growing number of self-employed people in the UK. “As the number of self-employed people continues to rise, the money owed through late payments is also likely to mount,” said Chauhan

In March 2019, a record 4.93 million individuals were counted as self-employed.

Many of these self-employed individuals are processing self-assessment returns for the first time, an HMRC system considered complicated for new users. To complete these self-assessment returns, self-employed individuals are required to register for a Unique Taxpayer Reference (UTR) number which can take months to obtain. The late acquisition of this number can delay the process of self-assessment returns and generate late payments from taxpayers.

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