We are hurtling towards the deadline for filing tax returns on line. Therefore, in this article, I will discuss tax returns, who needs to file tax returns, when you need to do it, the payment of tax owed and the implications of being late.
Who needs to complete a tax return?
You will need to complete a tax return if in the last tax year* any of the following was applicable to you:
- you were self-employed
- you got £2,500 or more in untaxed income, for example in tips or rental income
- your income from savings, investments or dividends from shares was more than £10,000 before tax
- you made profits from selling chargeable assets e.g. a second home, shares, or other chargeable assets and need to pay Capital Gains Tax
- you were a company director – unless it was for a non-profit organisation (such as a charity)
- a non-profit organisation director who received pay or benefits, for example a company car
- you or your partner earned over £50,000 and either of you claimed Child Benefit
- you had income from abroad that you need to pay tax on
- you lived abroad and had a UK income
- your taxable income was over £100,000
- you were a trustee of a trust or registered pension scheme
- you had a P800 from HMRC saying you didn’t pay enough tax last year and you didn’t pay what you owe through your tax code or with a voluntary payment
- your State Pension was more than your Personal Allowance and was your only source of income – unless you started getting your pension on or after 6 April 2016
- If the HMRC have written to you asking you to complete one
- Certain people within certain professions for example religious ministers or Lloyd’s underwriters although you usually won’t need to send a return if your only income is from your wages or pension.
For more information, visit https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
When do I need to complete my tax return?
You need to complete a paper tax return by 31st October for the previous tax year or online by 31st January. For example, the deadline for online returns for the 2016/17 tax year is January 2018.
You must register for Self-Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership by 5th October.
When is payment due?
The payment for the tax that you owe is due on 31st January for the previous tax year. Therefore if you leave your tax return to the last minute, unless you have been keeping money aside to pay the tax you could be caught short if you leave filing your return to the deadline.
If you make payments on account – advance payments towards your bill, you may also have payments due on 31st July.
You will have to make 2 payments on account every year if:
- your last Self-Assessment tax bill was more than £1,000
- you haven’t already paid more than 80% of all the tax you owe
The payments are due by midnight on 31 January and 31 July and each payment is half your previous year’s tax bill. If when the tax return is calculated, you owe more money, the additional amount is due on 31st January.
For example, in 2015/16 Bob filed his first tax return and had a tax liability of £5,000. He paid £7,500 on 31st January. This was made up of the £5,000 tax due for the 2015/16 tax year and the first payment on account of £2,500 for the 2016/17 tax year. The second payment on account of £2,500 was due on 31st July 2017. When he completed his tax return for the 2016/17 tax year, his tax bill was £6,000. He therefore had to pay £1,000 balancing payment plus £3,000 payment on account for 2017/18 tax year on 31st January 2018. With another £3,000 payable on 31st July 2018.
What happens if I don’t file my tax return?
If your tax return is up to 3 months late, you will get a fine of £100. If it’s over 3 months late, the penalty will be higher than this.
What happens if I don’t pay the tax I owe?
Interest will be added to the tax owed if your payment is late.
Do I have to file my own tax return?
You do not have to file your own tax return, you could employ an accountant to do this for you. You may be able to do your return yourself. However, for more complex circumstances, you may wish to engage an accountant. They will also be able to suggest ways to mitigate tax.
It is important to complete a tax return if you are required to do so and to do it in a timely manner. If you haven’t yet done your tax return for the 2016/17 tax year, you have just over a week in which to do it. Get a wriggle on!
There is lots of useful information on the HMRC website.
For more complex cases, speak to an accountant.
* Tax years run 6th April to 5th April