Ask The Circle: TAX Returns.

Do you find yourself leaving your TAX Returns to the last minute year after year? Find completing your TAX Return tedious and complicated? Do you want to know if you really need to do it, and if it really matters if it’s a little late?

Our Financial Controller Ruth has answered all of your need to know questions, so if you struggled this year, then the information below should help you to be much better prepared next time…

Why do I have to complete a Tax Return? 

If HMRC has issued you with a Tax Return you must complete it. 

It could be because: 

  • You are self employed. 
  • A partner in a business.
  • Rent out property.
  • You receive Tips and commission. 
  • Income from savings, dividends and investments.
  • Foreign income. 
  • Or to claim some Income Tax reliefs. 

I have heard that I can claim tax relief for working from home due to Covid-19. 

Do I need to ask for a tax return to do this? 

No, unless you already fill out a tax return, you can go online and create a Government Gateway user ID and password (if you don’t already have one). You will need you NI number and a recent payslip, or a valid UK passport.

What are the risks of leaving the Tax Return to the last Minute? 

The majority of people for some reason put off doing their tax returns until the very last minute every year.  

Paper returns should be submitted by 31st October, and online returns by 31 January. 

The later you leave it, the more chance of it being late, and incurring HMRC penalties, and fines for late submission and late payment of tax due. 

Tax returns are detailed documents and completing in a hurry means you will inevitably forget something. 

Being late or incorrect returns will flag you up to the tax man, once they have you its difficult to get rid of them. 

Leaving it to the last minute makes it impossible to get any help or advice as HMRC are inundated with phone calls. 

There are also penalties for making mistakes on your return; 

Deliberately underestimating your tax and attempting to conceal the fact could result in a penalty of between 30% and 100% of the actual tax owed!

What are the Fines for late submission? 

Instant £100 fine for being late, even if you have no tax to pay or have paid your tax. 

Thereafter, after 3 months additional penalties of £10 per day, up to a max of £900 after six months a further penalty of 5% of tax due or £300 whichever is greater and again after 12 months. 

 In addition to your fine you will also face charges for failing to pay tax on time. 

Penalties rise the longer it takes to pay HMRC. 

Last year almost 1 million people missed the deadline at £100 each… that’s huge revenue for HMRC.

Why do so many leave it so late to complete a Return? 

“I didn’t know I had to as I don’t owe tax.”

This does not matter if you have been served a notice to file you must do it.

“I forgot.”

Not an excuse, plenty of media reminders.

“Too Complicated.”

Get some help and do it early.

“I cant pay my tax.”

Bills will get even higher so at least lodge it.

It is a tedious form to fill out and does involve some preparation in tracking down information including bank interest, payslips, P60’s and dividends. Professional help may be worth the investment but don’t leave it till the last minute as prices may go up. 

What to watch out for if you are completing a Return for the first time

For those new to this, you may not have registered for an online account which takes up to 21 days to get activation codes to access. 

Not telling the whole story. It takes time to fill in all the sections but its important you do. Many people forget. 

  • Life insurance gains.
  • Stock dividends.
  • Income from property. 
  • Any benefits your claiming. 
  • Income from savings and expenses. 
  • Be mindful of child benefit if you earn over £50k a year. 
  • Don’t estimate expenses, you need receipts and invoices (and you need to keep these for 5 years).

Is there a reasonable excuse for filing late? 

  • Recent death of partner. 
  • Unexpected hospital stay. 
  • Computer failures. 
  • Issue with HMRC online service. 

If you think you really can’t make the 31 January deadline contact HMRC in advance of the deadline.  

If you are going to submit late and have a rough idea of how much tax is due, make the payment by the due date. This will reduce the late payment penalties.

HMRC will treat those with genuine excuses more leniently. They may ask for evidence so be careful of the excuse you give. 

What if I have made a mistake? 

If you’ve made a mistake, you can correct your return for up to a year after the filing date. 

HMRC has detailed guidance called: How to fill in your Tax Return (SA 150).

What if I can’t pay my tax? 

If you are struggling to pay your bill, contact HMRC payment helpline. They are much more sympathetic if you contact them than if you ignore them. 

If HMRC haven’t asked for a Return to be completed does that mean I don’t have to pay tax? 

If you have a new source of income on which there is a tax liability, you must notify HMRC by 5th October following the end of the year in which the income arose. 

Failure to notify penalties can apply.

What if I have many years’ worth of tax returns to complete? 

You may normally only submit three years worth of late tax returns. For example, in the tax year 2017-18 (ie from 6 April 2017 to 5 April 2018) you may submit returns for 2016/17, and three late returns – 2013/14, 2014/15 and 2015/16. In some cases, HMRC may process older returns

Any Questions?

If you still have burning questions about TAX, or would like to know how The Circle could help your business with all things finance related, you can contact us via our enquiry form or find out more about our consultancy services.

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