Bragging about witholding tax due by 31 January

Billy Bragg's tax protest, re the bonuses due for payment by (84%) state owned RBS, has received wide publicity in the media - from the FT and BBC to the Daily Mail, the Daily Mirror and the Guardian. And let's not forget his facebook group: NoBonus4RBS which now has over 23,000 members (at the time of writing).

I sense the genuine anger and frustration behind the protest and the growing support for Billy's campaign. Initially he was reported to be intending to withhold payment of the income tax he was due to pay by 31 January 2010. In his BBC interview however he admits that his taxes will be paid.

Here are a few facts for anyone considering joining the campaign and seriously intending to hold off paying their tax on 31 January.

Basic rules

1. If your tax is paid late the taxman's computer will charge you 3% interest until the tax debt is settled. If all of the tax due is not paid by 28 February the computer will add a 5% surcharge that you will be liable to pay in addition to the tax and interest. The surcharge increases to 10% if the tax isn't fully paid by the end of July 2010.
2. The £100 fine that you often hear about relates to the late submission of your tax return. So you can file your return online by 31 January and avoid the fine even if you don't intend to pay your tax on time. Incidentally, if you pay all your tax on time the £100 penalty is cancelled once your tax return has been fully processed.

Coming back to the campaign:

1. If you are an employee or pensioner you probably pay all of your tax through the PAYE system. This means you have no tax payable on 31 January. So you can join the campaign in spirit only.
2. If you are self employed or have to submit a tax return for other reasons you may well have already submitted your 2008-09 tax return. In such cases you and the taxman will know how much tax you should be paying by 31 January 2010. So you can expect to get increasingly threatening demands if you do hold back on payment.
3. If your tax return has yet to be filed the taxman doesn't know how much tax you are due to pay. So initially the demands will be for you to file your tax return. The £100 late filing fee will be charged and added to the outstanding tax, penalty, interest and surcharge.

Cutting off your nose
You may be due a tax refund from the taxman. This will generally only be the case if your total tax bill for 2008-09 will be lower than it was for 2007-08 - eg: because you suffered a fall in your income due to the recession.

The tax refund will arise if you have paid all the tax due last January and last July but where it now transpires that this is more than you needed to pay for 2008-09.

If this describes you then you would lose out if you joined the campaign by holding back on filing your tax return. Obviously the taxman won't send you a tax refund until he has processed your tax return.

Comment
I admire Bill Bragg for raising the issue so publicly and for linking it with tax payments due by 31 January. In practice though the taxman's computer will churn out standard demands for interest, penalties and surcharges if tax is paid late. And I can't see those demands being waived if anyone tries to argue that they paid late because of this campaign. So, support Billy's facebook group if you're so inclined - but pay your taxes on time!