Individuals who have income or gains on which the full amount of tax is not deducted at source will normally have two amounts that they should have paid by 31 January 2014:
• any balance due for 2012/13 (the year to 5 April 2013); and
• the first of two payments on account for 2013/14.
If these amounts were unpaid at 31 January 2014, interest and penalties may arise.
Interest will be payable, currently at 3%, from 1 February 2014 until the date of payment. This applies to both the balance due for 2012/13 and the first payment on account for 2013/14.
Penalties do not apply to any payment on account that is late. However, a penalty will be due in respect of the 2012/13 balance on 2 March 2014 (30 days after the due date) equal to 5% of the amount owing at that date. An additional penalty applies once the payment is six months late, and again when it is 12 months late, again equal to 5% of the amount due at the date in question.
These penalties for late payment are in addition to any amounts that may be due because the tax return for 2012/13 is submitted late.
It will be seen that, unlike interest charges which accrue gradually, penalties for late payment apply on a ‘cliff edge’ basis. If tax of £10,000 is paid late, it will incur an interest charge of 80 pence per day. By contrast, if payment is delayed by one day from 2 March to 3 March the penalty will increase from nil to £500. It is therefore important to ensure that payments are made by 2 March.
Private client tax