Taxpayers told they may not have to pay HMRC fees | Personal Finance | Finance
Tens of thousands of taxpayers may have been wrongly fined by HMRC, and many could be due refunds after a record number of penalties were cancelled last year.
A staggering 46,266 fines were withdrawn in just 12 months after being issued to people who either owed no tax or missed deadlines due to issues outside their control.
The figures, published in HMRC’s latest accounts, represent a 29% year-on-year rise in cancelled penalties. Experts are now urging people to challenge fines they believe are unfair.
Taxpayers can be hit with an automatic £100 penalty for missing the self-assessment deadline, while businesses face fines for late VAT returns.
But many have succeeded in overturning penalties after appealing through HMRC’s online system, which was updated in early 2023 to make challenges easier.
However, Andrew Park, tax partner at accountancy firm Price Bailey, warned the problem runs far deeper, with many fines being triggered by banking delays, HMRC’s own administrative errors, and long-standing customer service failures.
“Late filing penalties are disproportionately levied on people on low incomes, many of whom have no tax to pay,” he told the Telegraph.
It has also emerged that over the past five years, 600,000 penalties have been issued to people earning less than the £12,570 personal allowance, meaning they had no tax liability at all.
The think tank Tax Policy Associates, which obtained the data via a freedom of information request, has called for such penalties to be scrapped.
HMRC’s phone service has also come under fire. In the first half of 2024–25, the tax authority failed to answer 35% of calls, despite a target of 85%. Although recent improvements have been made with more call handlers, many taxpayers still struggle to get help before the filing deadline.
In total, HMRC issued nine million penalties last year, up from just over eight million the year before.
Mr Park said millions could be paying penalties unnecessarily: “When two-thirds of appealed penalties are overturned, yet only a small fraction of the nine million issued are challenged, it suggests a significant number of taxpayers may be paying penalties they could successfully contest.”
A new points-based penalty regime introduced under the Making Tax Digital programme means that self-employed people using digital systems will no longer be hit with an automatic £100 fine. Instead, they will accumulate penalty points, with a £200 cap per return.
However, those not covered by Making Tax Digital – including many low-income earners – will still be subject to the harsher, older system.
An HMRC spokesman said: “Our penalty reforms enable customers to appeal easily and quickly online against both penalties and penalty points. Our new points-based system means only those who persistently miss deadlines will incur a financial penalty.”
Taxpayers who believe they have been wrongly fined have 30 days from the date on the penalty notice to file an appeal. Those who no longer need to file a return must tell HMRC before January 31 to avoid a fine.
What to do you have been fined
