Tens of thousands of people who earn too little to pay income tax are being hit with hundreds of pounds in fines for failing to file a tax return on time, new data shows. Campaigners are calling for reform after more than 83,000 low earners were penalised by HM Revenue & Customs in 2021-22.
Figures obtained under the Freedom of Information Act by the Tax Policy Associates thinktank reveal that over 83,000 people earning below the £12,570 threshold received a £100 penalty. Only 17,000 of those fines were later cancelled on appeal. By contrast, just 20,000 people earning £100,000 or more were penalised.
The situation is worse for those fined £300 for filing a year late: half of the 61,000 such fines went to people who earn too little to pay tax. Only 12,000 were successful on appeal, compared to 5,000 fines issued to high earners. Dan Neidle, founder of Tax Policy Associates, said: “It’s shameful that tens of thousands of people on very low incomes… have their lives made more difficult by HMRC penalties.”
One self-employed photographer, who wished to remain anonymous, told the Observer he had been fined repeatedly despite HMRC acknowledging he did not earn enough to pay tax. He had not earned enough to pay income tax since 2017 and lived off savings and non-taxable income. He received a £3,000 bill for fines alone, leaving him in a “dark place”.
The use of fines is falling: in the previous year, 92,000 low-income taxpayers were fined. A new system giving warnings before penalties is being introduced, but campaigners warn of delays and unfairness. Joanne Walker of the Low Incomes Tax Reform Group said: “The current penalty regime will continue alongside the new regime… This has the potential to be unfair on those who remain in the current, arguably harsher, regime.”
An HMRC spokesperson said: “The government recognises that taxpayers who occasionally miss the filing deadline should not face financial penalties and reform of the system is under way. Our aim is to support all taxpayers, regardless of income, to get their tax right and avoid fines.”
