Subject to consultation, new late filing and late payment penalties will take effect from 6 April 2011 for personal, trust and partnership tax returns.

The existing rule that a personal/trust late filing penalty would be the lower of £100 and the balance of tax due will be replaced.

Instead, HMRC’s proposed late filing penalty regime will include the following sanctions:
£100 penalty immediately after the due date for filing (whether or not the tax has been paid)
daily penalties of £10 per day for returns that are more than three months late, running for a maximum of 90 days;
penalties of 5% of tax due for the return period (or £300 if greater) for prolonged failures (over 6 months and again at 12 months);
higher penalty of 70% of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (100% penalty if deliberate with concealment).

The penalties/surcharges for late payment of any tax due will be:
penalty of 5% of the amount of tax unpaid, generally 1 month after the payment due date (or at the filing date of the relevant return); and further penalties of 5% of any amounts still unpaid at 6 months and 12 months; suspension of late payment penalties where the taxpayer agrees a time to pay arrangement (where a tax debt is paid over time) with HMRC.

The existing rule effectively caps a late filing penalty at the amount of tax unpaid at 31 January.

The change will apply to the 2010-11 tax return, which are due on 31 October 2011 if sent on paper and 31 January 2012 if filed online. Full details are available from an HMRC guide (PDF).