By ensuring that you pay any tax on time, you can avoid paying the HMRC non-deductible interest for the late payment of tax.
Example:
Peter files his Tax Return in March, and discovers that he has a liability of £1,000 for the year, which he paid on 16 March.
Because he paid his tax late, he is liable for:
- interest on the late paid tax; and
- a further 5% late payment penalty because the tax was still unpaid on 2 March (30 days late).
He could quite easily have avoided the interest charge by paying his tax on time.
He will also face a penalty for filing his return late.
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