People looking to boost their UK state pension by paying voluntary national insurance face a rude awakening if they were self-employed in the UK and left the country since 2013 without notifying the tax authorities.
Thousands of Irish residents are currently applying to fill in gaps in the social insurance record in the UK between 2006 and the end of next week.
If they were working in the UK for a minimum of three years, worked until they left the country and worked abroad since then, they can buy state pension cover for each of those years for as little as £179.40 (€215).
However, if they had been self-employed in the UK and left without notifying His Majesty’s Revenue and Customs (HMRC), they could be facing bills of up to £1,600 (€1,917) plus interest for each year they failed to file a tax return – even if they had no tax liability.
Rules in place on tax residence since 2013 oblige self-employed people to notify the tax authorities if they will not be tax resident any longer.
Failure to do so means HMRC will expect them to file a self-assessment tax return. When that fails to arrive, fines kick in.
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The initial fine is £100 for filings that are up to three months late. Thereafter there is a daily fine for the next three months up to an aggregate of £900. Filings that are more than six months late are subject to a 5 per cent surcharge or £300, whichever is higher, and the same again for filings over 12 months late.
HMRC data shows that 1.1 million people who were expected to file a self-assessment by January 2025 failed to do so – close to one-in-10 of taxpayers HMRC has listed for self-assessment.
Under a freedom of information request, accountants RSM found that HMRC issued 155,000 late-filing penalties for the tax year 2021-2022 to people with no tax liability under self-assessment. Following appeals, 60,000 of those had their fines revoked.
Fines can be appealed on the grounds of “reasonable excuse” but UK case law shows that ignorance of the need to file is not considered reasonable in these cases.
When they apply to make voluntary national insurance payments, formerly self-assessed taxpayers who have fines outstanding in the UK for not filing or informing HMRC of their departure will be making their current addresses available to UK tax authorities to allow them to pursue those fines.
