Over 184,000 people have been fined by the HMRC, despite not earning enough money to pay tax. The fines were given to a number of people who had earned less than the personal pre-tax allowance, which currently sits at £12,500 per financial year.
The reason that the fines fell was because people failed to complete a self-assessment tax form on time for the 2020-21 financial year. According to data obtained by Tax Policy Associates via a Freedom of Information request, HMRC fined 92,000 of the lowest-paid ten per cent of the population for filing their tax return.
Retrospectively, just 39,000 of the highest-paid were fined in the same year.
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The Mirror reports that the majority of taxpayers aren't required to submit a tax return form, as their tax is automatically deducted from their employers. But about 11million across the UK have to file self-assessment tax returns as they have other income streams, or have done in the past.
Between 2018 and 2022, more than 660,000 fines were issued to people on low incomes - around 600,000 estimated to have been given to people who owe no tax whatsoever. Only 180,000 were successful in appealing these.
However, Tax Policy Associates detailed that the 600,000 figure doesn't represent the number of people, but the number of penalties dished out - with some parties potentially receiving more than one penalisation per head. Should you file your self-assessment tax return late, after January 31 - or October 31 if you use paper forms - you'll automatically be given a £100 fine.
The fines can grow by £10 per day after three months, and if you fail to pay within six months, you'll land an extra £600 on top. You could see another £300 fine if it's not filed within 12 months of the deadline - with the maximum penalty totalling £1,600.
Over a number of years, Tax Policy Associates said that this can amount to several thousand pounds - which could cause massive financial hardship on those who are on low incomes. Up until 2011, the penalty was scrapped for those whose returned showed that no tax was due.
Dan Neidle, a tax campaigner and founder of TPA, said: "We believe the law and HMRC practice should change. Nobody filing late should be required to pay a penalty that exceeds the tax they owe. People are falling into debt and, in one case we’re aware of, becoming homeless as a result of HMRC penalties.
"Advisers working with low-income taxpayers see this kind of situation all the time, and filing appeals for late-payment penalties often makes up a significant amount of their work."
A HMRC spokesperson told the Mirror: "The Government has recognised that taxpayers who occasionally miss the filing deadline should not face financial penalties, and has already announced reform of the system. Deadlines for returns are necessary for the efficient functioning of the tax system, though, and we strongly encourage anyone who does not need to file a return to tell HMRC.
"Our aim is to support all taxpayers, regardless of income, to get their tax right, and details of what to do if a person no longer needs to file a return are included in reminder letters every year."
