Tax Return Deadlines
This time of year tax payers start to frantically gather their information for completing their tax return.
The final deadline for paper tax returns fast approaches (October 31st) and, whilst those tax payers filing online may feel like resting easy until the online deadline of January 31st 2012, the benefits of getting organised early should not be underestimated.
With the nation’s purse strings being tightened, tax payers should be encouraged to maintain their records accurately and close to a real-time basis, thus allowing them to see the profitability and cash position of the business.
Up-to-date records also facilitate a prompt completion of the tax return, which avoids being charged penalties but more significantly, means the tax liability can be calculated. Being aware of your tax liability as early as possible, means you can put money aside throughout the year and not have to borrow or be short when the deadlines come round.
In this article we examine;
• how you figure out the deadline that applies to you
• what the filing deadlines are for tax returns
• how you go about filing your tax return
• when you must pay your tax
The Tax Year and Your Business' Accounting Record
The tax year runs from 6 April to the following 5 April. Therefore, we are currently in the tax year ended 5 April 2012- which you may also seen written as 2011/12.
If you run a sole trade or partnership, you may have any year end you like. It is worth discussing what year end to have with an accountant though, as there may be the chance of cashflow advantages with regards to your tax liability.
Quite often people choose the tax or calendar year, or if your business is seasonal, you may want to choose a quiet time so that you are not rushed off your feet and trying to collate your records.
The year end will determine which tax year applies to the business. So for instance, if your business has a year end of 31 December then your last set of accounts will have been drawn up to 31 December 2010. This set of accounts falls between 6 April 2010 and 5 April 2011 and so will fall into the 2010/11 tax year.
The Tax Return Deadline
Now you have established the tax year that applies, you can decide when your return must be filed. There are two methods of filing a tax return which have differing deadlines:
Paper – You can submit a hard copy of your tax return but you must do so by midnight on 31 October following the tax year end. So in our example above, your tax return would need to be filed by 31 October 2011. HM Revenue & Customs should send you the paper tax return to complete, but if they don’t or you misplace it, then you may download replacements from their website.
Online – Alternatively, you may submit your tax return online and you get an extra three months- until midnight of 31 January following the tax year end. So again, in our example above, that would give us a filing deadline of 31 January 2012.
If you miss the October deadline, you could register to file your return online with HM Revenue & Customs. There are some exceptions as to who can file online, but they are fairly unusual cases.
If you also miss the January deadline, HM Revenue & Customs will issue an automatic £100 fine. This initial penalty used to be reduced if your tax liability was under £100 and if you were due a refund, then the penalty would be cancelled altogether. But this no longer applies; the fine as now automatic.
If your return is over three months late, more penalties will start to accumulate and please note, HM Revenue & Customs have also increased these penalties too - see our previous article on the changes to the penalty regime found here.
Paying Your Tax
Any tax liability arising must be paid by 31 January following the tax year end. If we apply this to our example above, we would have to pay our tax bill by 31 January 2012.
However, if your tax liability is over £1,000 and you don’t have more than 80% of your tax collected at source (such as via PAYE), then you will also have to make contributions towards your tax bill for next year too. These are called payments on account (POA) and must be made on the 31 January and 31 July following the tax year end. Each payment on account is half of the tax due for the previous year.
Payments on account are supposed to ease the cashflow burden on tax payers by spreading the liability, although in your first year you could be faced with 150% of your tax liability! Thereafter, they should become more consistent depending on the fluctuations in your profits however we recommend seeking the advice of a tax professional to help manage your cashflow.
If you make late payments, HM Revenue & Customs will charge interest:
You can make payments to HM Revenue & Customs via:
• Direct Debit
• Debit/ credit card over the internet (BillPay)
• Internet or telephone banking
• Bank Giro
• The Post Office
• Post
Always make sure you include your Self Assessment number or Unique Taxpayer’s Reference (UTR) on payments to HM Revenue & Customs, so that they know whose record to allocate the payment to.
Those small business owners who have yet to get their receipts and other documents in order could be inspired to seek the advice of a specialist tax accountancy service. This would not only help to ensure that a business's tax affairs are all in order, allowing the owner to operate safe in the knowledge that they have no outstanding tax debts, but also help to avoid any of the penalty fines that are issued by HMRC for late filing of tax returns.
Posted by Thomas Fletcher
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