Personal Tax – Self Assessment; Things you need to know

Dec 31, 2020 | Guide, HMRC, Tax

According to the Self-Assessment Regime you are responsible for ensuring that your tax liability is calculated and any tax owing is paid on time. We at Wire Accountants stand ready to prepare Tax Returns on your behalf and advise you on payments that may need to be made to HMRC. But before we get to that, let us tell you in short, what you need to know about Self-Assessment rules and penalties.

Tax returns are issued shortly after the end of the fiscal year. Those who complete tax returns online are sent a notice informing them that a tax return is due. If you’re a taxpayer who is not issued with a tax return but has tax due, you should notify HMRC and have a return issued.

  • If you’re submitting online the return must be filed by the 31st of January following the end of the fiscal year.
  • If you are submitting in paper format, the return must be filed by the 31st of October following the end of the fiscal year.
  • Returns submitted after this date must be filed online to avoid penalties.

Fiscal Year

The fiscal year runs from 6th April to the following 5th of April. Therefor 2020/2021 runs from 6th of April 2020 to 5th of April 2021.

Deadlines

Tax returns are issued shortly after the end of the fiscal year. Those who complete tax returns online are sent a notice informing them that a tax return is due. If you’re a taxpayer who is not issued with a tax return but has tax due, you should notify HMRC and have a return issued.

  • If you’re submitting online the return must be filed by the 31st of January following the end of the fiscal year.
  • If you are submitting in paper format, the return must be filed by the 31st of October following the end of the fiscal year.
  • Returns submitted after this date must be filed online to avoid penalties.

Calculating liability and ‘Coding Out’

You can ask HMRC to compute your tax liability in advance of the tax being due. In this case the return must be completed and filed by the 31st of October following the fiscal year. This is also the statutory deadline for making a return where you require HMRC to collect any underpayment of tax through your tax code, known as ‘Coding Out’.

However, if you file your return online HMRC will extend this to the 31st of December. There will be only one assessment covering all your tax liabilities for the tax year, whether you or HMRC calculate the tax liability.

Penalties

HMRC can charge you a penalty for a number of reasons.

  • If you pay tax late;
  • If you submit a tax return or other paperwork late;
  • If you fail to tell HMRC about changes that affect your tax liability;
  • If you make an error on a tax return, payment or other paperwork that understates your tax liability or misrepresents your tax liability, unless you took reasonable care.

 

Late Filing Penalties

£100 penalty immediately after the due date.

It is important to note that this fine will be enforced even if there is no tax to pay or the tax due has already been paid. The full penalty of £100 will be due if your return is filed late even if there is no tax outstanding.

Additional penalties

  • Delayed by over 3 months – £10 per day up to £900.
  • Delayed by over 6 months – Additional £300 or 5% of the tax due if higher.
  • Delayed by over 12 months – Additional £300 or 5% of the tax due if higher
  • In particularly serious cases the penalty can be as 100% of the tax due

Reasonable Excuses

You have the option of appealing against some penalties if you have a reasonable excuse. What constitutes a reasonable excuse you may wonder? Well, wonder no more!

A reasonable excuse is something that kept you from meeting a tax obligation that you took reasonable care to meet. Following are the instances provided by the HMRC.

  • Your partner or another close relative died shortly before the tax return or payment deadline.
  • You had an unexpected stay in hospital that prevented you from dealing with your tax affairs.
  • You had a serious or life-threatening illness.
  • Your computer or software failed just before or while you were preparing your online return.
  • Service issueswith HM Revenue and Customs (HMRC) online services.
  • A fire, flood or theft prevented you from completing your tax return.
  • Postal delays that you could not have predicted.
  • Delays related to a disability you have.
  • You must send your return or payment as soon as possible after your reasonable excuse is resolved.
  • If you’re affected by coronavirus (COVID-19)
    • HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing dates).
    • Explain how you were affected by coronavirus in your appeal. You must still make the return or payment as soon as you can.

Corrections/Amendments

HMRC can correct a Self-Assessment within nine months of the date the return was filed. They may correct any mistakes in the return.

You can amend your Self-Assessment at any time within 12 months of the date the return was filed. The HMRC must be notified of any amendments from your end.

Enquiries

The purpose of an enquiry is to identify any errors on, or omissions from, a Tax Return which result in an understatement of tax due. However, the opening of an enquiry does not necessarily mean that a return is incorrect.

HMRC may investigate into your Return by giving written notice. Usually, the time limit for HMRC is within 12 months following the filing date. If HMRC does not enquire into your Return, it will be final and conclusive unless HMRC makes a discovery or you make an overpayment relief claim.

It is important to note that HMRC is unable to query any entry on a Tax Return without starting an Enquiry.

In the event of an Enquiry, we will also receive a letter from HMRC which will detail the information needed to check the Return. We shall contact you to discuss the contents of the letter.

Records

HMRC wants to make sure that underlying records to the Return exist in case they decide to Enquire into the Return.

Records of income, expenditure and reliefs claimed are required. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.

Enforcement Action

HMRC can take action to recover any tax you owe. This can usually be avoided by contacting HMRC as soon as you know you’ve missed a tax payment or cannot pay on time. You may get more time or an installment plan.

Where we come in

It is absolutely vital that your taxes are in order and paid on time, and your tax returns are submitted promptly to stay on the right side of the law and avoid penalties. Our capable and vigilant accountants accurately calculate your taxes, and provide consultation on your tax planning.  We offer you the peace of mind of knowing that your HMRC self-assessment will always be completed with the correct information and in a timely manner.

In addition, we will conduct Tax Efficiency Reviews for you and make sure you do not pay a penny more than you are required to. 

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