Partner Article

Self-Assessment deadline day draws near

Remember, remember the 5th of … October?!

“If you are newly self-employed or have additional income for the tax year 2014/15 you need to register for self-assessment by 5 October, otherwise your finances could go up in smoke,” says Lee Blackshaw, head of private client tax services at the Manchester office of Smith & Williamson, the accountancy and investment management group.

“Failure to register on time can result in penalties of up to 30% of the tax due, or more in some cases, unless you pay the tax by 31 January. You can register online at: https://www.gov.uk/register-for-self-assessment.”

“Registering for self-assessment enables HMRC to assign you a unique tax reference (UTR), and sparks the issue of a tax return. Returns are usually due by 31 January if done online – or 31 October for those that use paper forms – or within three months from the issue of the return notice, if later. The UTR number is then used to track your return and eventual tax payment.”

“Over 10 million people filed a self-assessment tax return for 2013/14* and this is expected to increase, due to an increasing number of people having a second income stream, from buy-to-let enterprises to selling items online for profit, or owing the high income child benefit charge, coupled with roughly one in seven individuals now being self-employed.”

“Although Britain is set to overhaul its tax returns system through digitisation, don’t forget that’s not happened yet and if you want to send it in on paper then returns are due by 31 October - or three months after requested by HMRC, if later.”

“While HMRC waived a number of late tax return penalties in 2015 it should not be relied upon to do the same in 2016. There are a number of deadlines and charges associated with your tax return so it is important to remain aware of them to avoid being fined.”

“If you’re newly self-employed with income of, say, £50,000 in 2014/15 you will need to pay tax and class 4 National Insurance of £19,262 (£12,841 plus a payment on account for the next year). If you fail to notify HMRC about this by 5 October you could get a penalty of up to £3,852. If you do notify but then miss the tax return and payment deadlines, other penalty charges would start to rocket as follows:

Lateness Late return Late payment Total penalties

Miss the tax return deadline £100 £100

Tax unpaid by 2 March 5% of unpaid tax = £642

Tax return 3 months late Daily penalty £10 per day for up to 90 days = £900 £1,642

Tax return 6 months late 5% of the tax on the return or £300, if greater = £642 £2,284 42

Tax unpaid by 31 July 5% of unpaid tax = £642 £2,926

“While missing the notification deadline may not automatically cause a penalty to arise, should you still pay the appropriate tax by the due dates, there is a very real possibility of HMRC being unable to assign your payment appropriately without the UTR. The consequences could be late fines or payments, which may prove challenging to recoup. It is vital to contact HMRC if you think you may need to file a tax return.”

* https://www.gov.uk/government/news/hmrc-sees-biggest-digital-self-assessment-ever

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

The tax treatment depends on the individual circumstances of each client and may be subject to change in future.

This was posted in Bdaily's Members' News section by Smith & Williamson .