It is that time of year again when the deadline for filing paper self-assessment tax returns is looming.
Many people have now become fully familiar with the deadlines and requirements which have been around for a few years.
For others, things may still be vague.
Therefore it is worth re-emphasising what the requirements are and how the self-assessment deadlines are twin-track.
The starting point is that there is one set of deadlines for the tax return and another set for the tax payments.
The tax return
There are two separate deadlines for the tax return – one for the paper return and the other for electronic filing.
For paper filing for the tax year ended 5 April 2017, the deadline is at the end of October.
If you have missed the 31 October paper filing deadline, then you can file only online.
The reason for the much earlier deadline for paper filing compared with online filing is that the government is keen to phase out paper.
With paper filing, HMRC has to input the tax return information into its computer systems, which ties up numerous members of staff.
During a time of headcount reductions in the organisation, this is a burden which it wishes to see reduced.
Another reason the government wished to move people away from paper filing and on to online filing is in order to receive clean data.
It goes in to the HMRC system directly from the taxpayer, bypassing any inputting errors which might be caused by HMRC staff.
Facts and figures
Let’s turn to the preparation.
If you are preparing your own tax return, set aside some time when you will not be disturbed.
There is nothing worse than starting and then being disturbed and then getting a part of your return information wrong.
But before you start working on your tax return, have all your usual source material at the ready. This will include:
- Your P60 form – you must enter the precise figure for your income and not just a rounded approximation or “ballpark” figure.
- Specific details of self-employment income, together with receipts and invoices for items you consider deductible from this income.
- Details of any freelance income which is in addition to your employment income.
- All bank and building society interest details.
- Details of any dividends.
If you are running late
If you consider that you will miss the paper filing deadline then you need to think ahead to the electronic filing deadline of 31 January 2016.
There are different deadlines for paper and online returns, plus a separate payment deadline
If you have filed online in previous years you will already have a Pin code for the HMRC system, so you can keep this safe for a later date.
If you do not have a Pin, you will need to go to the HMRC website and register.
It is a fairly straightforward process but you need to be aware that the Pin code will be sent to you by post.
HMRC advises that you should allow seven days for this to arrive.
Under the deadlines I mentioned earlier, 31 January is also a payment deadline.
So the forthcoming 31 October paper filing deadline does not in fact coincide with a payment requirement.
If you have been within self-assessment for a number of years, and usually owe tax of more than £3,000, then you are likely to be within the existing payments regime.
This means that you will make a payment on account within the tax year on 31 January.
So for the tax year 2016-17, which ended on 5 April 2017, a payment on account was required on 31 January 2017.
A second payment on account is required on 31 July 2017 and the final amount is payable on 31 January 2018, together with the payment on account for the tax year 2017-18.
Paying is not purely a matter of sending in a cheque.
You can pay by direct debit, you can set up a budget account to accumulate the amount over the year for the amount you need to pay and you can pay by credit card.
Further details are on the HMRC website.
The late return
As mentioned above, the paper filing deadline is not the end of the road.
You can register to file online and then move to the 31 January electronic filing deadline.
So do not let things slide, or you face potential penalties.
HMRC has been running a campaign to ensure that those who have failed to file their tax returns in past years will do so now.
It has been chasing those who were thought to have outstanding tax and had not filed their returns going back to 2009-10.
If you are in this category, you should make sure you clear up the backlog relating to past years, otherwise there will be a tax-related penalty of up to 100% of any outstanding tax.
Late filing penalties
As the tax return and the tax payment follow their own requirements, so too does the late penalties regime.
A late tax return penalty is £100. This is automatic and is issued as an automated process by the HMRC computer.
You also need to note the penalties for tax returns filed late after 1 November 2013 for paper returns, and 1 February 2014 for internet filing, are far more expensive than in the past.
If you fail to file within the deadline, penalties apply:
- Three months late – you will start clocking up automatic £10-per-day penalties. This rate applies for 90 days to a maximum of £900. This is on top of the £100 penalty.
- Six months late – £300 or 5% of the tax liability, whichever is higher. This is in addition to the penalties above
- 12 months late – £300 or up to 100% of the tax due; again this is in addition to the amounts above.
Previously under the self-assessment rules, you could avoid the penalty charge for a late filed tax return if all the tax payable had in fact been settled.
Under the new regime that makes no difference and the penalties remain payable. As you can see the new regime is quite expensive if you are a late filer.
Late payment penalties
There is also a regime for penalising late payments of tax.
HMRC may accept some excuses for late filing
A penalty of 5% of the unpaid tax is levied for late payment, but it applies one month after the payment deadline, from 28 February, to give people a bit of leeway.
However interest will still be payable on non-payments or underpayments of tax from 1 February, and will also be payable on the penalty itself.
There will be another 5% penalty for the outstanding tax, six months after the 31 January payment deadline.
This will be followed by another 5% penalty for payments which are 12 months late.
As with the tax return, these amounts accumulate and each penalty is subject to interest.
If for any reason you are unable to file your tax return by 31 October, and you do not wish to move to electronic filing, then you may still have the chance to claim you had a “reasonable excuse” and have HMRC extinguish the £100 penalty.
There is an appeal form which enables you to put forward your reasonable excuse.
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