HMRC fined 184,000 low earners for not filing return despite no tax owing

theguardian.com:

More than 180,000 people on low incomes were fined for not filing a tax return last year, even though they received so little that they had no tax to pay in the first place.

HM Revenue and Customs handed out fines to 184,000 people paid less than £12,500 a year – the level under which people were then not subject to income tax – in the 2020-21 financial year (the latest for which full figures are available) for failing to complete a self-assessment tax form on time.

Many of these people, already in severe financial difficulties, misunderstood the initial fine and were then subjected to further fines and interest. Some people were left facing fines of thousands of pounds, which would take them many years to pay.

One of the people, Diana Cabral, 61, from Chichester, said she was fined £100 for not filing the self-assessment form, which she had disregarded because she was employed full-time and paid tax automatically from her salary.

“I thought this was a mistake so I disregard the notice. I ended up paying more than £2,000,” she said. “I’ve appealed several times without success. I was poor before, I’m even more poor now. I don’t have any savings to pay the fine. I had to make an agreement to pay £20 a month. It is going to take years.”

Most of the 32 million taxpayers in the UK are not required to submit a tax return, because most people’s only income (beyond modest savings) is from their employer (and the tax is taken at source). However, about 11 million people are required to submit a “self assessment” income tax return if they have other sources of income or have done in the past.

Data released by HMRC after freedom of information requests by thinktank Tax Policy Associates (TPA) shows that 92,000 people among the