Photo by Pettycon, Pixabay

31st January is one of the most important tax-related dates in the UK when the Self-Assessment online tax return has to be submitted to HMRC. This date is especially important for the self-employed as they are probably the most important tax payer group obliged to submit the Tax return.

Getting close to the deadline, we want to run through the most important things that you need to know about filling in a tax return to avoid penalties. You can complete and submit it yourself, however if you are intimidated by the amount of paperwork and calculations you have to make, we are here to help!

Get in touch 0796 396 0869, [email protected] or fill in the online form here.

Who needs to submit a tax return

You’ll need to send a tax return if, in the last tax year:

• you were self-employed - you can deduct allowable expenses
• you got £2,500 or more in untaxed income, for example from renting out a property or savings and investments - contact the helpline if it was less than £2,500
• your savings or investment income was £10,000 or more before tax
• you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
• you were a company director - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car
• your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
• you had income from abroad that you needed to pay tax on
• you lived abroad and had a UK income
• you got dividends from shares and you’re a higher or additional rate taxpayer - but if you don’t need to send a return for any other reason, contact the helpline instead
• your income was over £100,000
• you were a trustee of a trust or registered pension scheme
• you had a P800 from HMRC saying you didn’t pay enough tax last year - and you didn’t pay what you owe through your tax code or with a voluntary payment

   

  How to submit?

  You can submit your Tax return in an old fashioned way - by sending a filled in paper form to HMRC. However, we highly recommend using HMRC’s online service. You can read more about Personal tax account here.

  What happens if you are late?

  Completing your Tax Return form might not be the most entertaining task in the world and so most of us tend to put it off for the last minute. However, a careless approach could cost you quite a lot. Last year 870, 000 tax payers were late to submit their Tax return forms and were penalised.

  Penalties for late submission

  Please note that you may be charged a penalty for late submission of a self-assessment tax return, even if you do not owe any tax.

  • If you are late in submitting the annual tax return, you will be charged £100.
  • If you are more than 3 months late, each extra day will cost you an additional £10. This daily penalty fee is applicable for 90 days in a row and the maximum amount can add up to £900. A further fixed amount of £100 will also be added to the penalty, therefore you might be obliged to pay £1000.
  • If you are 6 months late, you will have to pay the above-mentioned penalties and also a fine of either £300 or 5% of the tax due, whichever is the higher.
  • If you are 12 months late, you will have to pay the above-mentioned penalties and also another £300 fine or 5% of the tax due, whichever is the higher.

  Keep in mind that, in really serious cases, HMRC might charge you up to 100% of the tax due instead, as well as any tax you owe, doubling your payment.

   

  Penalties for incorrect tax return information

  If you are in a rush or do not have sufficient tax-related knowledge, you may well make some mistakes in your tax return. This might make your wallet thinner and if HMRC decides that you were trying to mislead them on purpose, your wallet will suffer even more.

  Penalties are based on the amount of tax you owe and are payable in addition to the tax owed.

  • If HMRC decides that you have been careless with your tax return, you will have to pay between 0% and 30% of the extra tax owing.
  • If HMRC decides that you have deliberately underestimated your tax, the penalty will be between 20% and 70% of the extra tax owing.
  • If HMRC decides that you have deliberately underestimated your tax and attempted to hide the fact, the penalty will be between 30% and 100% of the extra tax owing.

  Penalties for late tax payment

  You can get a penalty not only for the late submission of your tax return or for submitting incorrect information but also if you are late paying your taxes.

  • If you are late paying your taxes, you will be charged 5% of the tax due.
  • If you are 6 months late, you will be charged 5% of tax outstanding at that date.
  • If you are a year late, you will be charged 5% of tax outstanding at that date.

  HMRC penalty system is rather subjective and depends on how HMRC treats your case. Therefore, it is worth investing time in filling in your tax information properly. If you make a mistake but manage to prove that it happened by accident, rather than its being intentional, you might avoid paying the penalty.

Article based on HMRC information.