31 October marks the last day on which you can file, using paper, your 2010/11 Tax Return. File it on paper after that date and you will be fined.

HMRC seems to be getting fed up with the thousands of people who fail to submit their tax returns on time. They are making that penalty regime much much nastier.

Up to the 2009/10 Tax Return, if you missed a deadline you were fined £100. Then 6 months later, if the form was still not submitted, another £100. These are the penalties which applied when Self Assessment first came in – back in 1996. They had ceased to be a significant deterrent for many people. To make them even weaker, if your tax return, once sent in, showed a liability of less than £100 then the penalty got reduced. So if your tax return showed a bill of £44 you could face, at most, two penalties of £44.

So what has changed now?

• The penalty of £100 will apply if you miss the deadline, but will no longer be reduced if your tax bill is low, or nil.

• This penalty of £100 will hit you if you file a paper return after 31 October, or if your online return is submitted after 31 January.

• Then after a further 3 months, if the return is still missing, there will be daily penalties of £10 per day, to a maximum of £900.

• 6 months after the deadline you get hit again – this time the higher of £300 or 5% of the tax due for the year.

• None of these penalties get reduced if your tax bill ends up being low, or nil.

So let’s look at 2 examples, one where your tax return shows tax due of £10,000, and the other where your tax is spot on with nothing owed.

Example 1 – tax return filed late, tax due £10,000

Filed 2 days late – penalty £100

Filed 4 months late – penalty £100 plus 31 days @ £10 – total £410

Filed 6 months late – penalties £100 plus £900 of daily penalties plus £500 (higher of £300 and 5% of the tax due i.e.£500) – total £1,500

Example 2 – tax return filed late, tax due £nil

Filed 2 days late – penalty £100

Filed 4 months late – penalty £100 plus 31 days @ £10 – total £410

Filed 6 months late – penalties £100 plus £900 of daily penalties plus £300 (higher of £300 and 5% of the tax due i.e.£50) – total £1,300

The examples show that delaying filing your Tax Return can be very costly indeed. The big change to the system is that even if you owe virtually no tax the penalties can quickly mount to well over £1,000. And by the way – that’s not the end of the matter. HMRC still wants to get the tax return from you, and could still issue an estimated tax bill to help encourage you to supply it.

You can read a checklist for preparing to fill in your tax return by clicking here.

So remember – filing a paper return after 31 October will cost you, as will filing electronically after 31 January. Long delays are now punished harshly.

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.