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 2017:
- any balance due for 2015/16 (the year to 5 April 2016);
- the first of two payments on account for 2016/17
If these amounts were unpaid at 31 January 2017, interest and penalties may arise.
Interest will be payable, currently at 2.75% pa, from 1 February 2017 until the date of payment. This applies to both the balance due for 2015/16 and the first payment on account for 2016/17.
Penalties do not apply to any payment on account that is late. However, a penalty will be due for the 2015/16 balance on 2 March 2017 (30 days after the due date). This is 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. Each of these additional penalties is, 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 2015/16 is submitted late.
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 75 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. 2 March is therefore a key date in the tax calendar, arguably more important than the 31 January deadline.
Please contact your usual Moore Stephens tax adviser for more information.