HM Revenue and Customs (HMRC) recently made headlines by levying fines on individuals earning less than £12,500 per annum – the threshold under which income tax is not applicable – for not filing a self-assessment tax form on time during the 2020-21 financial year.
HMRC’s Penalty Framework
Understanding the fine structure helps to underscore the burden imposed on these low earners.
Missing the 31st January deadline incurs a £100 penalty.
Three months later, it can escalate by £10 daily.
After half a year, a flat £300 can be added, with another £300 after a full year, potentially culminating in a £1,600 penalty.
A Tale of Inequity: Low Earners Bearing the Brunt
The magnitude of this issue is significant: approximately 184,000 individuals, many already grappling with financial hardship, were subjected to the penalty, with some landing in a vortex of further fines and interest.
An analysis by thinktank Tax Policy Associates (TPA) using data from freedom of information requests unveils a disturbing dichotomy.
In 2020-21, the lowest-paid 10% of the population saw 92,000 people fined for late filing, while only 39,000 of the highest-paid 10% faced the same penalty.
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