Fines for errors in tax returns up 80pc

THE number of freelancers and landlords fined for careless mistakes in their tax returns spiked last year as the tax office tries to close the £32bn “tax gap”.

Pressure has built on civil servants to ensure HM Revenue and Customs brings in as much tax as possible. As a result, it issued nearly 90,000 penalties in the 2021-22 tax year, up from 49,701 in 2020-21, according to a Freedom of Information request.

Many of the fines related to mistakes in self-assessment returns filed during lockdowns – when more freelancers and landlords completed forms themselves rather than using an accountant.

Others may have made incorrect estimates or calculations as they did not have access to physical receipts and files during lockdowns, according to law firm Pinsent Masons, who filed the FOI request.

Rosie Hooper, of the wealth manager Quilter, said the figures showed tax office workers were under pressure to close the “tax gap” – the difference between the total amount of tax that should be paid versus that which actually is. This stood at £32bn in 2020-21.

She added: “The jump in issued penalties is a warning shot from HMRC. It has to collect enough revenue to pay back for pandemic schemes such as furlough, and it needs to look like it is taking a tough line.”

Sean Mccann, of advice firm NFU Mutual, said the sharp rise was also driven by HMRC staff moving back to their normal jobs. “During the pandemic, the tax office moved a lot of staff away from compliance work to customer service. Now they are back to their regular job, we are seeing more tax return challenges.”

There was some respite for the selfemployed after the figures showed four in five penalties issued by HMRC were suspended – taxpayers were warned about their future conduct rather than being fined.