The UK's tax authority, HM Revenue and Customs (HMRC), continues to face scrutiny over its penalty regime, which has resulted in thousands of fines for individuals who do not owe any tax. Recent figures reveal that the majority of penalties were issued to low-income earners, prompting criticism from various quarters. The Tax Policy Associates (TPA) thinktank uncovered these alarming statistics under the Freedom of Information Act, shedding light on the extent of the issue.
In 2021-22, HMRC fined more than 83,000 people who earned less than the income tax threshold of £12,570. These individuals received a £100 penalty for late filing of their tax return, despite not owing any tax. Furthermore, only 17,000 of these fines were later cancelled on appeal, leaving many to bear the financial burden.
“It’s shameful that tens of thousands of people on very low incomes, often with difficult lives, have their lives made more difficult by HMRC penalties,” said Dan Neidle, the founder of TPA.
The penalty regime in question will continue alongside a new system for a few years, but challenges remain. Last year alone, 92,000 individuals among the lowest-paid 10% of the population faced fines for late filing. Critics argue that these measures disproportionately affect those who can least afford it.
The situation is particularly dire for low-income earners when it comes to the £300 fines for filing a year late. Tens of thousands who earn too little to pay tax are still receiving hundreds of pounds in fines. Despite appeals, only 12,000 were successful in overturning their penalties.
“The overwhelming majority of customers file on time,” stated an HMRC spokesperson.
For higher-income earners, the scenario appears slightly different. Of the penalties issued, only 20,000 were to individuals earning £100,000 or more, and just 5,000 of these were actually fined. This discrepancy raises questions about the equity and effectiveness of the penalty system.
A self-employed photographer who wished to remain anonymous shared his experience with The Observer. He faced numerous fines despite not earning enough to owe tax.
“I was sent reminders for tax, I ignored them and they sent more and the fines kept increasing,” he explained.
“Two or three months later they sent me a bill for £3,000, not for tax due but for fines,” he recounted.
“Mentally I’ve struggled and all of this is quite burdening. There seems to be an attitude of ‘you are guilty unless you can prove you’re innocent’.”
This narrative highlights the emotional and financial toll such penalties impose on individuals already struggling with low incomes.