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Self assessment tax returns can be complicated, with many tax payers struggling to complete these correctly. A recent study found that 735,258 tax returns in January 2019 were submitted less than 24 hours before the self-assessment filing deadline at midnight 31st January 2019.
Legislation changes frequently, meaning that taxpayers risk paying too much tax and/or incurring penalties through failing to get things right.
As more information moves online, and tax becomes more digital, taxpayers may increasingly need help in understanding their obligations, ensuring that the information HMRC holds about them is correct and meeting the increased filing obligations.
Do I need to complete a Tax Return?
The Self Assessment deadline of 31st January 2020 for filing a 2019 Tax Return is fast approaching. The 2019 Return covers the period 6 April 2018 to 5th April 2019.
So how do you know if you should complete a Tax Return ?
If any of the following were applicable to you then you may be required to register for Self Assessment and complete a Tax Return:
- Were self employed or a partner in a partnership business
- Were a company director
- Had income over £100,000
- Received more than £10,000 from dividends or investment income
- Received rental income
- Had foreign income
- You or your partner earned over £50,000 and claimed child benefit
- Made a capital gain on the sale of an asset
HM Revenue & Customs have developed a useful online check which will also help you decide whether or not you need to complete a Tax Return.
If you discover you need to file a Tax Return, the first step is to register for Self Assessment. The easiest way to do this is through HMRC’s website. Shortly after registering, HMRC will issue you with a tax reference number (UTR). You will need your UTR to file your Return.
If you miss the Self Assessment deadline then an automatic penalty will be issued, whether or not you actually owe any tax.
How to spread the payment of your Self Assessment tax liability
Your Self Assessment liability has to be paid by 31 January following the end of the tax year, with a possible 2nd payment due on 31 July depending on what your liability is.
There are a number of different methods you can use to actually make the payment, details of which can be found on the HM Revenue & Customs’ website.
As any alternative to actually making the payment in a lump sum, you can spread payment of your Self Assessment liability over twelve months through your PAYE tax code as long as all these apply:
- you owe less than £3,000 on your tax bill
- you already pay tax through PAYE, for example you’re an employee or you get a company pension
- you submitted your paper tax return by 31 October or your online tax return online by 30 December
If you find yourself in a position were you are unable to pay your liability, you should contact HMRC’s Business Payment Support Service as soon as possible, ideally before the payment deadline. You may be able to agree an instalment plan to settle the debt over a period of time and whilst interest may still be payable, you should be able to avoid the penalty charges.
If you do not agree a payment plan and fail to settle your liability in full by the due date interest will be charged and if paid more than 30 days late a 5% surcharge will be issued.
Reducing your payments on account
Payments on account are payments made towards your eventual Income Tax and Class 4 NIC liability.
Each payment is based on half your previous year’s tax bill and are payable by 31 January and 31 July following the end of the tax year.
You have to make the payments on account every year unless:
- your last Self Assessment tax bill was less than £1,000
- you’ve already paid at source more than 80% of all the tax you owe
If you believe your tax bill will be lower than in the previous year, you can ask HMRC to reduce your payments on account.
This can be done through your online digital account or by completing form SA303.
It is possible to reduce the payments on account at anytime, even after the first payment has been made. This will result in any over payments being refunded.
It should be noted that if you reduce down your payments on account lower than they should have actually been this will result in interest being charged.
You can find out more information about our personal tax services here.
HM Revenue and Customs (HMRC) must receive your tax return and any money you owe by the deadline midnight 31st January 2020. You’ll usually pay a penalty if you’re late submitting your tax return. You can appeal against a penalty if you have a reasonable excuse.
If you do not pay the tax you owe for the previous tax year on time, the more you delay, the more you will be required to pay. This is why it is imperative that you pay the tax as soon as you can. The information below details the penalties you will have to pay if your tax return is late. If a partnership tax return is late, then each partner will be required to pay the penalties shown below.
Penalties for missing the tax return deadline:
- 1 day late: A penalty of £100 which will apply even if you have no tax to pay or have already paid the tax you owe.
- 3 months late: £10 for each following day – up to a 90 day maximum of £900. This is in addition to the fixed penalty above.
- 6 months late: £300 or 5% of the tax due, whichever is the higher. This is in addition to the penalties above.
- 12 months late: £300 or 5% of the tax due, whichever is the higher.
How we can help
Loucas aims to ease the stress caused by self assessment and help you avoid costly mistakes, by offering a complete self assessment service.
We can save you time, worry, and money by handling this process for you. We will do all the necessary calculations, complete your return, and offer advice on how you might better manage your tax liabilities.
We do not believe that dealing with tax correspondence should be stressful or confrontational. We work towards having a constructive relationship with HMRC and believe that this works in the best interests of our clients.
Please do contact us at Loucas for help. Alternatively, you can reach us on 01622 758257.