Would you rather someone else handled this? Our Self Assessment service means we prepare, check and file your tax return with HMRC on a fixed fee.
This case study is based on genuine client work carried out by our practice. Names, figures and identifying details have been changed to protect confidentiality, and the numbers shown are representative of the situation rather than the exact amounts. Your own position will differ.
The scenario
Someone has not filed for three years. It started with one missed deadline, then the letters began arriving, and each one made it harder to open the next. By the time they ask for help, the envelopes are in a drawer, unopened.
This is far more common than people believe, and the shame attached to it is the single biggest reason it goes on for years rather than months.
What it is actually costing
Late filing penalties stack up per return, per year. For each year: £100 immediately, even if no tax is owed. After three months, £10 a day for up to 90 days, so up to £900. After six months, 5% of the tax due or £300, whichever is greater. After twelve months, the same again.
So a single year left unfiled for over a year carries at least £1,600 in filing penalties before a penny of tax. Three years of that is £4,800 minimum, and late payment penalties and interest at 7.75% run separately on top.
Here is the cruel part. Those penalties accrue whether or not you owe any tax at all. Someone whose figures would have shown a refund can still be sitting on thousands in penalties for the crime of not telling HMRC.
The determination problem
If you do not file, HMRC can issue a determination: their own estimate of what you owe. It is usually higher than reality, because they are guessing from limited information and have no incentive to guess low.
A determination cannot be appealed. It can only be displaced by filing the actual return. So the letter demanding £18,000 does not go away by arguing. It goes away by filing.
That is why filing is always the first move, no matter how far behind you are.
The approach we would take
File everything, oldest first. Even years where nothing is owed. The obligation is to file, and filing is what stops the bleeding.
Reconstruct records from bank statements where the paperwork is gone. It is entirely doable and it is normal work, not an admission of chaos.
Appeal the penalties where there is a reasonable excuse. Serious illness, bereavement, or a genuine HMRC failure can qualify. Not having the money generally does not, unless the reason for that was itself unforeseeable. Appeals are far more credible once the returns are actually in.
Agree a Time to Pay arrangement for what is genuinely owed. HMRC use these constantly. It is an ordinary instalment plan, not a mark against you.
The point of this example
The penalties are for not filing, not for not paying. Those are two separate obligations with two separate sets of penalties, and people conflate them, then avoid filing because they cannot pay. That turns a cash flow problem into a compliance problem and doubles the cost.
If you are behind, the position almost never improves by waiting, and it is very rarely as bad as the person imagines. Get in touch. We have seen worse and we are not going to lecture you.
Behind on your returns?
However many years it has been, we can get you up to date calmly, claim your expenses, appeal penalties where we can, and arrange affordable payment.