A Guide to Self Assessement Tax Returns
January 31st is the deadline for those who need to submit a self assessment tax return. Mitchell Charlesworth’s tax experts have put together the following guide for those individuals who still need to submit a tax return to HMRC.
Our objective at Mitchell Charlesworth will always remain to help you submit your tax return efficiently and to reduce any anxiety levels as far as possible.
For more information, or to find out how our tax team can help you meet your tax responsibilities, do not hesitate to contact us.
Tax Returns Deadlines
Firstly and most importantly, if you have to send in a Self Assessment tax return and make payments then your online tax return must reach HMRC by midnight on 31 January.
So for the 2017-18 tax year, the deadline for online returns is midnight on 31 January 2019.
There are very few exceptions to this rule. By way of example, if HMRC sends you a letter, telling you to complete a tax return, after 31 October, then the deadline may be later. In this instance, the letter will tell you the deadline - it is usually 3 months from the date of the letter.
There's also an earlier deadline of 30 December if you want HMRC to collect any tax you owe through your tax code. You can ask for this if you owe less than £3,000.
Should you choose to send a paper tax return, it must reach HMRC by midnight on 31 October. There are limited exceptions to this rule, including sending a Self Assessment return for a registered pension scheme or non-resident company. Should this be the case then the deadline is 31 January as you can only send paper returns for these scenarios.
Do I need to complete a tax return?
Self assessment tax returns are for those individuals who do not have straightforward tax affairs. That is, you are self-employed or have income above a certain level. Those individuals who have straightforward tax arrangements will simply pay tax already through PAYE (Pay as You Earn).
The most common reasons that people need to fill in tax returns:
- You are self-employed (or a partner in a partnership)
- Your annual income is more than £100,000
- You have income from savings, investment or property:
- £10,000 or more from taxed savings and investments
- £2,500 or more from untaxed savings and investments
- £10,000 or more from property (before deducting allowable expenses)
- £2,500 or more from property (after deducting allowable expenses)
- You have income from trusts, settlements and estates
- You are a trustee
- You have capital gains tax to pay
- You need to claim reliefs or expenses
- You or your partner receive Child Benefit and your income is over £50,000:
The High Income Child Benefit tax charge was introduced on 7 January 2013 and may mean you need to complete a Self Assessment tax return. You must complete a tax return if all of the following apply:
- your income is over £50,000 a year
- you live with a partner and your income is higher than theirs
- you or your partner are entitled to receive Child Benefit (or get an equivalent amount from someone who claims Child Benefit for a child who lives with you)
- you jointly decide to keep receiving Child Benefit and pay the new tax charge
- you get income from overseas
- you have lived or worked abroad or are not domiciled in the UK
- you are a company director, minister, Lloyd’s name or member
Registering for self assessment
Before you complete your first tax return you need to register for Self Assessment. Once you have registered, HMRC will set up the right records for you that will ensure you pay the right amount of tax and National Insurance.
When should you register?
The latest you should register is by 5 October after the end of the tax year for which you need a tax return. The tax year runs from 6 April one year to 5 April the next. For example, if you need to pay income tax on income made in the 2017-18 tax year, you must let HMRC know by 5 October 2018.
In order to register you will need the following information:
- Your contact details
- Your company’s contact details (if you have started self-employment)
- Your National Insurance number
- The date your circumstances changed
- Your 10-digit Unique Taxpayer Reference (if you have previously completed a tax return)
Where you register for self assessment depends on your specific circumstances. Links to the relevant section for you can be found here: www.gov.uk/log-in-file-self-assessment-tax-return.
If you have previously submitted a tax return online in the previous year, HMRC will not send you a paper tax return. If you have opted to receive digital communications then you will be prompted by email to check your self assessment online account for your Notice to File letter.
What records should you keep?
In order to complete a Self Assessment tax return as an employee, pensioner or company director then you will need to keep various records. You will also need to refer to these documents should HMRC have any questions about returns you have completed:
1. Income from employment documents
- your P45 - if you leave your job, part 1A of this form shows your pay and tax to the date you left
- your P60 - if you're in a job on 5 April, this shows your pay and tax details for the tax year
- form P11D - this shows details of your expenses and benefits, such as a company car or health insurance
- certificates for Taxed Award Schemes
- information about redundancy or termination payments
You should also keep records of other income or benefits from your employment not covered in the list above, for example:
- tips or gratuities received
- benefits in kind, for example meal vouchers you receive in connection with your employment from someone other than your employer
- lump sum payments not included on your P60 or P45, for example incentive payments or golden hellos
2. Records of any expenses
As a self employed individual, you may have to pay expenses out of your own pocket. Under self assessment you may be able to claim for all or some of these expenses to reduce your tax liability. You must therefore keep records of your expenses so that they can be included.
3. Capital Gains Tax records
The records that must be kept will depend on your circumstances. We recommend that you keep records of any asset you have owned for the eventuality that you make a gain or loss when you sell, give away, transfer or exchange it.
4. Income from property
You should keep details of any income and rents you have received from property and also records of any expenses you have incurred letting out the property.
5. Pension records
You should keep any records relating your pension, including:
- your form P60 giving details of your pension and the tax deducted
- your form P160 (part 1A), which you received when you retired and started getting a pension from your former employer
- any other details of a pension (including State Pension) and the tax deducted from it
6. Benefits records
You should keep any records relating to: Statutory Sick Pay, Statutory Maternity, Paternity or Adoption Pay, social security benefits and Jobseeker's Allowance.
7. Interest, dividends or other income from UK savings, investments or trusts
You should keep the following information:
- bank and building society statements or passbooks
- statements of interest and other income you've received from your savings and investments
- tax deduction certificates supplied by your bank
- dividend vouchers received from UK companies
- other vouchers such as scrip dividend vouchers
- unit trust tax vouchers
- life insurance chargeable event certificates
- details of income you receive from a trust
- details of exceptional amounts you've received, for example an inheritance or other windfall
- letters and all other paperwork relating to your savings and investments
8. Foreign income or gains
You should keep all dividend vouchers, tax certificates and personal financial records including:
- records of overseas earned income, for example from employment, self-employment or property letting
- receipts for any expenses you wish to claim
- dividend certificates from overseas companies
- certificates or other records of tax paid - either in the UK or overseas
9. Income from employee share schemes or share-related benefits
You should keep information on all share schemes or share-related benefits including:
- information about what you paid for your shares and the relevant dates
- copies of share option certificates and exercise notices
- letters about changes to your options
- details of benefits you've received as an employee shareholder
Penalties – What happens if you miss the tax return deadline:
Should you miss the tax return deadline, then you should still strive to get your tax return in as soon as possible as the longer you delay submitting, the more in penalties you will have to pay.
The table below shows the penalties you'll have to pay if your tax return is late. If a Partnership tax return is late, each partner will have to pay the penalties shown below:
- 6 months late
- 12 months late
- 12 months late and the tax payer is found to be deliberately withholding information
- 5% of tax due or £300, whichever is greater
- 5% of tax due or £300, whichever is greater, unless the taxpayer is found to be deliberately withholding information that would allow HMRC to assess the tax due
- Deliberate and concealed withholding 100% of tax due or £300 if greater
- Deliberate but not concealed withholding of information – 70% of tax due or £300 if greater
In serious cases you may be asked to pay up to 100% of the tax due instead. In some cases the penalties can be even higher than this.
These are as well as the penalties above.
Penalties – What happens if you cannot pay the tax you owe:
It is important that you pay the tax you owe for the previous tax year on time otherwise you will have to pay a penalty after 30 days and the longer you delay, the more you'll have to pay. So it's important to pay the tax as soon as you can.
You may find once you have calculated your amount of tax due that you cannot pay in full and on time. If this is the case then you may consider:
- approaching your bank/building society to see if they will support you through the short term difficulty
- looking at your outgoings to see if there is any non-essential expenditure that you can stop or reduce
- approaching people that owe you money to see if they can pay you more quickly
If you are still unable to pay after considering these options, you should contact HMRC’s Business Payment Support Service Helpline on Telephone 0300 200 3835 as soon as possible.
HMRC may allow you time to pay. However, if you delay contacting HMRC until after the due date, you will be charged interest and you may also be charged a penalty or a surcharge.
What counts as a ‘Reasonable Excuse’ to miss the Filing Deadline?
If you do fail to file your tax return on time, without a ‘reasonable excuse’, then you could be liable for a late filing penalty. However, if you do believe that you have a reasonable excuse then you may be exempt from paying the late filing penalty. Generally, a 'reasonable excuse' is when some unforeseeable or unusual event beyond your control has prevented you from filing your return on time.
HMRC lists the following as reasonable excuses for filing late returns:
- a failure in the HMRC computer system
- your computer breaks down just before or during the preparation of your online return
- a serious illness, disability or serious mental health condition has made you incapable of filing your tax return
- you registered for HMRC Online Services but didn't get your Activation Code in time
- a fire, flood or theft prevented you from completing your tax return
- postal delays that you couldn’t have predicted
- delays related to a disability you have
Each case will be examined on its merit and HMRC will still expect you to have done everything in your power to submit your return on time.
HMRC will not accept an excuse where you haven't made a reasonable effort to meet the deadline. For example, if you:
- found the online system too complicated to follow
- left everything to your accountant to do and they let you down
- forgot about the deadline (even if you didn’t get a reminder from HMRC)
- did not try to re-submit your return on time once a problem with the IT system was put right
- registered for HMRC Online Services after the filing deadline
If you think you have a reasonable excuse for filing late, then you should contact HMRC immediately, especially if you have been charged a late filing penalty and need to appeal against it.
More details about appealing against late submission penalties can be found on HMRC’s website here: https://www.gov.uk/tax-appeals/reasonable-excuses
More details on all of the information above can also be found on HMRC’s website: https://www.gov.uk/topic/personal-tax/self-assessment
The details above have been published in line with the Crown Copyright regulations.
For more information, or to find out how our tax team can help you meet your tax responsibilities, please contact our specialist tax partner: