At this time of year, we are all preoccupied with Christmas and the festivities. But small business owners and tax payers shouldn’t overlook their requirement to file a tax return.
HM Revenue & Customs (HMRC) estimates around 11 million people are required to submit a 2013/14 tax return. Taxpayers will need to file their returns electronically by 31 January 2015 in order to avoid being issued with an automatic filing penalty. The 31 January also marks the date by which your outstanding tax must be paid.
In this article, we take a closer look at the self assessment filing deadlines and raise some important issues that tax payers should be aware of.
Getting ready to file online
It takes some time to get registered with HMRC - both in terms of informing them that you need a tax return (because you’re newly self-employed for example) and also to obtain online access to HMRC’s website to file your return electronically.
So it’s really important that you factor in some processing time. And remember, contrary to popular belief, HMRC will not necessarily send you a tax return to complete- it is your responsibility to register for Self Assessment if necessary.
Fact or fiction? "Filing your tax return early, means you must also pay your tax early".
Don’t leave it until January
The more time you leave yourself to prepare your return, the better. This should reduce the risk of errors and mistakes being made, which could not only be costly, but could also mean that you end up having to re-do your return.
Last year, the busiest day for online returns was 31 January 2014, when HMRC received 569,847. The busiest hour occurred between 4pm and 5pm, when 45,706 returns – more than 12 per second – were received by HMRC. And 21,027 people left it until the eleventh hour, and filed their online return between 11pm and midnight on deadline day.
So don’t leave your return until the final day, as HMRC’s website and call centres will be under tremendous pressure.
Late Filing Penalties
Up until a few years ago, an automatic penalty of £100 would be issued for a late tax return and this could be reduced if you paid your tax by the due date or the tax liability was less than £100.
However, the penalty regime was completely overhauled and a late tax return is currently subject to the following penalty regime:
- An initial £100 penalty, which will apply even if there is less than £100 tax to pay or the tax due is paid on time
- After 3 months, additional daily penalties of £10 per day - up to a maximum of £900
- After 6 months, a further penalty of 5% of the tax due or £300 - whichever is greater
- After 12 months, another 5% of the tax due or £300 - whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due
Each of these penalties is in addition to one another, so a return filed a year late could face penalties of at least £1,600 - and this could escalate depending on the level of tax due.
Penalties are a waste of your hard-earned cash and you do not get tax relief for them either. Even if you can’t afford your tax bill, it may be advisable to file your return on time to avoid those nasty late filing penalties.
And that’s not the end of it…
Please be aware that the penalties described above, are only for the late filing of a Self Assessment tax return. There are additional penalties for the late registration with HMRC and late payment of tax- the latter of which also incurs interest.
Help is at hand
HMRC’s online filing system for tax returns calculates your tax liability for you. But needless to say, it will not check whether your figures are accurate or that you have claimed your full entitlement to expenses, reliefs and allowances.
But your local TaxAssist Accountant would be happy to take care of all your tax affairs for you; from registration with HMRC, to completion of the return, to calculation of your tax liability and the due dates.
So don’t get the New Year off to a bad start by filing your tax return late and facing a late filing penalty.
By Jo Nockels
Last updated November 2014