H M Revenue & Customs has announced that people who submit their tax return after the 31 January deadline will face significantly higher penalties.

Previously, tax returns filed after the deadline would attract a £100 fine, however, under the new rules which first apply to 2010/11 tax returns, taxpayers who file their returns late will be charged £100 on day one and further daily penalties of £10 after three months.

HMRC now consider the old system as having failed to encourage people to submit their tax returns on time, causing it unnecessary administration and delays in the collection of the tax due. It hopes the new harsher regime will collect more tax with less resource, allowing it to concentrate more on organised tax evasion.

The new penalties for filing tax returns late are as follows:

One day late

Individuals will be charged an initial penalty of £100, even if they have no tax to pay or have already paid all the tax owed.

Over three months late

Individuals will be charged an automatic daily penalty of £10 per day, up to a maximum of £900.

Over six months late

Individuals will be charged further penalties, which are the greater of 5% of the tax due or £300.

Over 12 months late

Individuals will be charged yet more penalties, which are the greater of 5% of the tax due or £300. In serious cases people face a higher penalty of up to 100% of the tax due.

The deadline for submitting paper tax returns is 31 October, while those filing online have until 31 January. Meanwhile, the penalties for paying income tax late are also being changed. An initial penalty of 5% of the unpaid tax will be charged after 30 days, with further penalties levied at six months and a year if it remains unpaid.

Most people would consider that they pay enough tax already, so don’t end up getting fined as well and give even more to the Chancellor. Now the deadlines are know start to prepare in advance as it can take some time to get all of the necessary information together.