Over 1.3 Million Taxpayers Charged by HMRC for Late Self-Assessment Payments
Newly released figures have exposed that a staggering 1.3 million taxpayers were charged late payment interest by HM Revenue and Customs for the 2023/24 tax year. This revelation comes from a freedom of information request submitted by the investment platform AJ Bell, which detailed that 1,370,000 individuals paid interest on overdue self-assessment tax payments during that period.
Government Collects £137.5 Million in Late Payment Interest
So far, the Government has collected an enormous sum of £137.5 million in late payment interest from these taxpayers. The average interest bill amounted to £100.37, indicating that many people paid more than £100 on top of the tax they already owed. This significant financial burden highlights the ongoing challenges faced by taxpayers in navigating the UK's complex tax system.
Expert Analysis on Tax System Complexity
Charlene Young, senior pensions and savings expert at AJ Bell, commented on the situation. "These latest figures suggest that taxpayers still face difficulty navigating the UK's complex tax system and HMRC are cashing in as a result," she stated. Young further explained that millions have paid late payment interest in recent tax years, despite efforts to relax the rules on who must file a self-assessment return.
She pointed to a series of tax changes that have compounded the issue. "Tax-free allowances for dividends have been repeatedly slashed since 2018, with the current allowance standing at just £500 compared to its original £5,000 level," Young noted. Additionally, the rates of income tax on dividends increased in 2022 and are set to rise again for basic and higher rate taxpayers in the next tax year.
Impact on Investors and Taxpayers
The expert described a "perfect storm" that drags smaller investors into calculating and paying these taxes for the first time, while also causing bills for existing taxpayers to jump. This situation is similar for profits on investments outside of ISAs and pensions, where a lower capital gains tax allowance and recent hikes to tax rates have created further complications.
"Taxpayers can become unstuck if they find the systems and deadlines difficult to navigate, and others potentially face higher interest and penalties when it comes to mistakes and not paying on time," Young warned.
Changes in Late Payment Interest Rates
Ms Young provided crucial details on the interest rate adjustments. "Late payment interest was hiked from April 6, 2025 to base rate plus 4%, when it had previously been base rate plus 2.5%," she explained. Interest accrues daily on the original amount owed, and although rates have been decreasing, the trajectory of base rate cuts is now looking more uncertain. This uncertainty suggests that individuals may have to foot an even higher interest bill in the future, adding to the financial strain on taxpayers across the country.
