If the estimated one million people, as confirmed by HMRC, who missed the January tax return deadline fail to settle their dues by the three-month cut-off at the end of April, they could be hit with a collective £1 billion in fixed and late payment penalties.

The warning comes from financial advisory firm Hoxton Wealth, which emphasised the importance of managing personal finances effectively to avoid joining this growing number. HMRC verified that 27,456 people submitted their returns in the final hour before the midnight deadline for 2024-25 returns on January 31.

"Where a tax return is filed late, the consequences can be significant, particularly if the tax is also paid late," said Claire Spinks, Hoxton Wealth's global head of tax. "The £100 fixed penalty for missing the filing deadline is just the tip of the iceberg.

"If you are more than three months late, you will pay £10 per day for up to 90 days to a maximum of £900. If you are more than six months late, then you will have to pay a further £300 or 5% of the tax liability, whichever is higher.

"And there is the same penalty again at 12 months. If the tax isn't paid by the January 31 deadline, then interest accrues daily from that date until payment. HMRC's current interest rate is 7.75%."

Additionally, Spinks highlights that late payment penalties apply irrespective of whether the return was submitted punctually. These comprise 5% of the outstanding tax 30 days after January 31; an additional 5% of the outstanding tax after six months and a further 5% of the outstanding tax after 12 months. For those both filing and paying late, all these charges will be levied.

She said: "Normally, HMRC has 12 months from the date a return is submitted to open an enquiry. If the return is filed late, that enquiry window is extended to 12 months from the end of the quarter in which the return is filed, increasing the period of exposure.

"So, if a 2024/25 tax return is filed on August 8, 2026, showing a tax liability of £25,000, and the tax is also paid late on that date, you are facing late filing penalties of £2,250; a late payment penalty of £2,500 and £1,003 in interest.

"That's a total additional cost of £5,753, which is around 23% of the original tax liability, purely due to a six-month delay.

"In my experience, people often delay filing because they are worried about the tax bill. However, it is almost always better to file on time, reduce late-filing penalties, and then put a Time to Pay arrangement in place with HMRC.

"While interest will still run, a Time to Pay arrangement prevents late payment penalties from arising."

The specialist further noted that for UK nationals residing abroad, the ramifications of overlooking deadlines could prove considerably more serious: "In a cross-border context, missed UK tax deadlines can have consequences that go well beyond late-filing penalties.

"For individuals living overseas, late or incomplete filings can delay or in extreme cases prevent access to relief under Double Taxation Agreements, resulting in UK tax being charged upfront and reclaimed only later, if at all. The result is that a missed deadline can multiply both cost and complexity, even where there was no intention to underpay tax."

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