In recent years, the Taxman has been showcasing impressive figures in annual press releases for tax return submissions, with consistent records for on-time filings for Self Assessment tax returns.
It's no different this year, with over 11.5 million taxpayers filing their tax returns last Friday's deadline for the 2023–2024 tax year.
However, a closer look at historic data from the past five years uncovers an intriguing persistent trend—approximately 1.1 million taxpayers missed the deadline last year, and 600,000 missed it the year before.
But does this mean late filings are on the rise? There is some data for this year's submissions that helps fuel this theory.
In the latest tax filing cycle, 97.36% of returns were completed via digital platforms. This overwhelming preference for online filing is not accidental; it is the result of concerted efforts by HMRC to streamline the process. With the introduction of improved digital tools such as the HMRC app, online dashboards, and timely reminders, taxpayers can now easily access their accounts and receive instant confirmation when their return is submitted.
So, what contributes to people missing the deadline and handing HMRC a sweet windfall?
- Procrastination: Many taxpayers rely on last-minute efforts to complete their tax returns. Data indicates that on this year's deadline day alone, more than 732,000 returns were filed, with filing activity peaking between 16:00 and 16:59. This rush suggests that even with digital efficiencies, procrastination remains a critical issue.
- Last-Minute Rush: A significant number of taxpayers seem to prefer the adrenaline of a last-minute submission. In one instance, over 31,000 returns were recorded in the final hour before the deadline. This last-minute scramble not only increases the risk of errors but also heightens the chances of incurring penalties due to any unforeseen technical issues.
- Technical or Logistical Issues: Although online submissions have ironed out many of the complications associated with paper returns (which have a much earlier deadline in October), there are still occasional glitches and periods of high server load that can impede timely filing. In some years, temporary technical issues have contributed to a small fraction of the late filings.
HMRC has implemented a firm penalty structure designed to encourage timely submissions and cynically also capitalise on the expected late returns:
- Initial Fixed Penalty: Every late return incurs an immediate fixed penalty of £100, regardless of whether a payment is due. This flat rate serves as an early deterrent against delay.
- Additional Daily Penalties: If a return is filed more than three months late, taxpayers face daily penalties of £10 for up to 90 days, potentially adding up to an extra £900.
- Subsequent Increased Penalties: If the return remains outstanding after six months, a further penalty of 5% of the tax owed (or at least £300) is applied. The penalty can multiply once again at the 12 month mark if the return is still outstanding.
A clear pattern in the timing of filings is a concentrated rush around the deadline day, particularly during the late afternoon and the final hour before the deadline. These patterns point to a common behavioral flaw: the tendency to leave matters until the last possible moment, regardless of technological improvements.
Another factor to consider from some experts is that underlying economic pressures coupled with psychological factors contribute to late submissions. Issues such as financial stress or uncertainty over tax obligations can put people off. We created a fast tax return calculator to help people quickly see what they could owe before going through the slog of filing to help alleviate this fear.
Recognising that financial difficulties can contribute to late filings, HMRC offers "Time to Pay" arrangements which allow taxpayers to spread their tax payments over time. This flexibility helps reduce the immediate financial pressure that might otherwise delay a return submission.
For taxpayers, the key to a stress-free tax season lies in early planning, taking full advantage of digital tools, and seeking help when needed.