Figures suggest HMRC charged 420,000 penalties to people with incomes too low to pay any tax between 2018 and 2022.
The penalties were issued for not filing a tax return meaning each person would have received a penalty of at least £100.
An article from Tax Policy Associates calculated 40 percent of all late filing penalties that were charged went out to people in this category.
The group is calling for the law to change so nobody filing late is required to pay a penalty above the amount of tax they owe.
A person has to earn at least £12,570 a year before they start paying income tax at the basic rate of 20 percent.
There were 184,000 penalties issued to people who don’t earn enough to pay tax in the 2020 to 2021 tax year.
Analysts at Tax Policy Associates estimated some 600,000 penalties were issued overall to people who didn’t pay tax over the four-year period. Some of these were successfully appealed and so were not charged.
The group pointed out some of these charges would have been issued to the same person, sharing figures showing how a person had accrued a bill for over £4,900 from 2017 to 2020.
The group warned people are falling into debt and even becoming homeless as they struggle to pay the HMRC penalties.
Most people who are in employment do not have to file a tax return but others are required to, such as people who are self-employed as a sole trader and who earns £1,000 or more.
If a person is required to submit a tax return, if they miss the deadline they are automatically given a £100 fine.
After three months, the penalty increases by £10 a day, up to a maximum of 90 days, and after this additional penalties can be applied.
A Government spokesperson said: “The Government has recognised that taxpayers who occasionally miss the filing deadline should not face financial penalties, and has already announced reform of the system.
“Deadlines for returns are necessary for the efficient functioning of the tax system though, and we strongly encourage anyone who does not need to file a return to tell HMRC.
“Our aim is to support all taxpayers, regardless of income, to get their tax right and details of what to do if a person no longer needs to file a return are included in reminder letters every year.”
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