Over 1.3 Million Taxpayers Face Late-Payment Interest Charges
More than 1.3 million taxpayers have been charged interest for failing to complete their tax obligations on time, according to newly released figures. The data reveals that the Labour Party government has already collected a substantial £137.5 million in late-payment interest for the 2023/24 tax year alone.
This equates to an average interest charge of just over £100 per person affected. However, the final total is expected to rise significantly, as these figures only include cases where the interest or penalty has already been paid by taxpayers.
Historical Context and Growing Financial Burden
Previous years demonstrate how quickly these charges can accumulate. Revised figures for the 2022/23 tax year show a record £200.1 million was collected from 1.62 million taxpayers, with the average charge reaching £123.52 per person.
Financial experts argue this growing problem reflects the increasing complexity of the UK tax system and the ongoing squeeze on allowances, which is dragging more people into the self-assessment process than ever before.
Tougher Penalties and Changing Regulations
The figures emerge as HMRC has implemented stricter penalty measures. From April 6, 2025, late payment interest was increased to 4% above the Bank of England base rate, up from the previous 2.5% above base rate. This interest accrues daily on any outstanding tax owed.
Charlene Young, senior pensions and savings expert at AJ Bell, commented that these figures indicate taxpayers continue to struggle with navigating the complex rules. "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.
Multiple Factors Driving Increased Taxpayer Burden
Young highlighted several contributing factors:
- Millions have paid late payment interest in recent tax years despite rule relaxations about who must file self-assessment returns
- Tax-free allowances for dividends have been repeatedly reduced since 2018, with the current allowance at just £500 compared to the original £5,000 level
- Income tax rates on dividends increased in 2022 and will rise again for basic and higher rate taxpayers next tax year
- Similar challenges affect investment profits outside ISAs and pensions, with lower capital gains tax allowances and recent rate increases
"This perfect storm drags smaller investors into calculating and paying these taxes for the first time but also means bills for existing taxpayers have jumped," Young explained.
Future Changes and Quarterly Reporting Requirements
Looking ahead, Young outlined upcoming changes that will affect sole traders and landlords. From April 6, 2026, those with qualifying income over £50,000 must submit quarterly online returns. This threshold will gradually decrease to £30,000 from April 2027 and £20,000 the following year.
"Although the penalty points system could prove fairer when it comes to mistakes, people could face higher bills under Making Tax Digital for late payment of money owed due to the new penalties," she cautioned.
The combination of complex regulations, reduced allowances, and stricter penalties creates significant challenges for taxpayers navigating the UK's evolving tax landscape.
