6th April 2016 – 5th April 2017 Tax Returns Due
The deadline for tax returns for the 2016-2017 tax year is looming. Millions of Brits will need to submit their forms and pay any tax they owe by midnight on 31st January. Failure to meet this deadline can result in harsh financial penalties. To avoid fines and interest charges, take steps to submit your tax returns and pay your bill in time.
Do You Need to File a Tax Return?
If you receive an e-mail from HMRC telling you to send a tax return, then you have to do it. You may not receive one if you haven’t enrolled with HMRC yet. If this is your first time submitting a tax return, you will have to enrol first. Ordering your Unique Tax Reference can take up to 10 working days, so do it sooner rather than later. If you aren’t sure whether or not you have to complete a tax return, contact HMRC for advice. Call the Self-Assessment helpline on 0843 178 4198 or the Tax Returns helpline on 0844 248 2559. Here are the position and earnings criteria for people who do need to submit self-assessment tax returns:
- company director (unless for a charity or non-profit organization)
- sold shares or a second home and owe capital gains tax
- any taxable income from overseas
- £10,000 or more from savings or investments
- £10,000 or more from dividends (unless held in a tax-free ISA)
- £2,500+ from renting out a property
- more than £50,000 while claiming child benefits (you or your partner)
- taxable income of over £100,000
- HMRC sent a P800 saying you didn’t pay enough tax last year (unless your tax code changed or you made a voluntary payment)
So, you need to submit a tax return. Unfortunately, the deadline for paper form submission passed a few months ago. If you missed it, your remaining option is to submit your tax return online. You may already have a Government Gateway account from using other Government services. Your login details will be the same. However, as mentioned, you’ll need a Unique Tax Reference to submit your self-assessment tax return. Request this immediately if you don’t already have one, or if you didn’t file online last year.
While you wait for it, make sure to get all your receipts and papers in order. You will have to enter identification reference numbers from your passport or driving licence, plus your National Insurance Number and bank details. Gathering all the necessary information on your income can take some time, too. The longer you have to wait, the closer to the wire it gets. Many people will leave filing their returns to the last minute leading up to 31st January. As a result, the HMRC website and phone helplines will be unable to match demand. Get everything sorted in advance!
Submit and Pay
Once registered, you will have to answer a series of questions to generate your tax return form. You cannot skip any of them. If your finances are complicated, there will be a lot to fill in. You may want to employ a tax adviser or accountant to deal with your tax return for you. If not, fill everything in correctly yourself, then check for any accidental mistakes. You must declare your total income, plus any employer benefits. This includes bank interest, rental income, dividend income, and any income from your job. Remember to include your pension details, and claim any applicable deductions. This could be claiming Gift Aid on charity contributions. If you’re self-employed, try claiming tax relief on business expenses with the Annual Investment Allowance.
31st January is not only the deadline for filing tax returns but for paying the taxes themselves. It can take up to 72 hours for your tax bill to appear on your account once HMRC calculates how much you owe. In addition, you have to consider the amount of time it will take for your payment to go through. Due to changing systems and laws, you can no longer pay at the Post Office or by credit card. You can still set up a Direct Debit payment using a debit card in your online account. However, if you haven’t set up a Direct Debit with HMRC before, this could take 5 working days. Call HMRC for advice on other ways to pay. They may accept the payment on the date it was paid and not the date they receive the payment.
What Happens If You Miss the Deadline?
If you don’t file your tax return and pay your tax bill before the deadline, you will end up paying more. HMRC will automatically fine you £100 if you’re one day late. Even if you paid the tax you owe or don’t owe anything, you still have to pay the £100 penalty. After this, HMRC will add a £10 fine for every extra day until you file and pay. This will run up to 90 days, so you could have to pay £1000 including the initial £100 fine. The penalties only increase the later you are, and HMRC may even charge interest on outstanding payment amounts.
If you can provide a “reasonable” excuse for missing the deadline, HMRC might waive any resulting penalties. The excuse must be something unexpected or out of your control which prevented you from filing your tax return. Examples include computer failure, an unforeseen hospital stay, or the recent death of a partner. HMRC will ask you to provide evidence to confirm the excuse is genuine. If you found the system too difficult to fill out your tax return, HMRC won’t accept this. You can call the HMRC helplines for assistance filing and paying taxes online.
The Treasury is currently looking to reform the tax return penalty system in the near future. They may replace it with a points-based system instead, where consistent compliance earns points. This will help HMRC to go after deliberate tax evaders and people who constantly miss the deadlines. HMRC will then be more lenient towards people who simply trip up but have a history of compliance with their tax returns and payments.