Tax penalties can be huge depending upon the factors that caused it. It can range from 100% to 200% that can take up to thousands of pounds every tax year. So, if you aren’t aware of certain factors that incur penalties, you won’t be able to mitigate risk in time.

Here are some factors causing tax penalties that shouldn’t be practiced.

Failure to file a tax return

The primary reason for incurring tax penalties is the late filing of a tax return. If you happen to file a late tax return, you will be charged with £100. This penalty increases up to £900 (90 days at £10 a day from 3 months late).

Mistake or misinterpretation

Mistakes can happen sometimes. In such situation, you need to inform the HMRC right away. When you do this, they may consider your errors as innocent and uncharacteristic resulting in no penalty. However, you should be able to prove your error was a genuine one that led to underpayment of tax.

Lack of reasonable care

To make few errors is different thing than missing out a major chunk in a tax return. As a taxpayer, forgetting to fill out a major section of a tax return will show carelessness from your side. As a result, HMRC may give penalties up to 30% of the tax due for the failure to take reasonable care.

Deliberate understatement

Committing errors deliberately is a serious offence and thus regarded as a tax fraud by HMRC. This is why you shouldn’t knowingly put out false information in the tax return in order to get benefits and reduce your tax liability. If you do such things, you would incur penalty up to 70%.

Hide deliberate understatement

When you give out false information in the tax return deliberately, submit it to the HMRC deliberately and then conceal it from them, you will be in serious trouble. Because of this major offence, you can be treated severely and even face criminal prosecution. Moreover, this can lead to a penalty up to 200% of the tax due.

All of these can lead to penalties so make sure you always avoid all of them. But, if you have already made one of such mistakes, get in touch with a professional tax accountant immediately.