For many individuals and businesses, it is an important duty to file a self-assessment tax return. But, you may end up in a difficult situation with the deadline for submission, which often leads to fines. Knowing what a self-assessment tax return is, who should complete one, and the consequences of failing to complete one in time is vital if you want to avoid an unneeded tax bill.
This article discusses penalties for not filing a tax return on time, potential exemptions from these penalties, and what to do if you have missed the tax filing deadline. Plus, we will also cover how an accountant can help.
What is a self-assessment tax return?
Self-assessment tax returns are a system for collecting income tax from individuals and businesses in the UK and in some other countries. In contrast to tax that is withheld from wages or other income, it requires the taxpayer to report their income, expenses, necessary deductions and other information in a tax return form.
It allows taxpayers to self-determine tax liability based on the specifics of their situation. Self-assessment is typically needed for sole traders, directors of companies, and high earners whose income is untaxed. It is critical to submit on time to prevent paying penalties and interest.
Who must complete a self-assessment tax return?
Some individuals and businesses must submit a self-assessment tax return. This covers all self-employed people, sole traders, and partners in a partnership with income over a certain threshold. Directors of companies may also need to file a return, depending on their circumstances. A director must complete a Self Assessment tax return if they receive any untaxed income, such as dividends above the dividend allowance, rental income, bank interest, overseas income or other income not taxed through PAYE. Directors must also file if they receive taxable benefits, have a director’s loan that triggers a tax charge, earn more than £100,000, make capital gains, or need to claim certain tax reliefs. HMRC may also require a director to file a return even if none of these factors apply.
Individuals must also file a return if they receive rental income, investment income above the relevant allowances, or income from trusts, or if they need to pay the High Income Child Benefit Charge. Anyone earning more than £100,000 per year, or making certain claims for tax relief, is also required to submit a self-assessment tax return. Determining whether you fall into any of these categories is essential to avoid penalties and remain compliant.
When is the deadline for tax returns?
If you want to ensure that you meet the tax return deadline so you can avoid any penalties or fees, you need to know the right dates. However, the date depends on how you’re filing it.
If you’re planning on electronically filing your tax return, it must be done before January 31st. If you wish to go through the paper filing route, you must have it done before October 31st.
What happens if you miss the tax return deadline?
If you fail to meet the deadline for submitting your tax return, a number of things could happen. Even if you do not owe tax, there is an automatic £100 late filing penalty. If your return is more than three months overdue, HMRC may apply daily penalties, depending on how late it becomes.
You will also owe interest on any unpaid tax, which increases the total amount due. Failure to file or pay for an extended period can result in harsher penalties or, in serious cases, criminal prosecution. Acting quickly helps minimise penalties and reduces the risk of HMRC taking enforcement action.
Penalties for late tax returns
The penalties for failing to meet your tax return deadline vary based on how long you’ve been late and whether you owe tax or not. Here is a rundown of the standard punishments:
- First penalty: An automatic £100 fine is charged if you miss the filing deadline, even if you have no tax to pay.
- Over three months: If your return is more than three months overdue, daily penalties can apply. These are £10 per day for up to 90 days and a maximum of £900. These daily penalties only apply once HMRC has issued a notice advising that they will be charged.
- Six months later: A further penalty is charged. This is either £300 or 5 percent of the tax due, whichever is higher. If no tax is owed, HMRC normally still charges the fixed £300 penalty.
- 12-month delay: Another penalty of either £300 or 5 percent of the tax due, whichever is higher. In cases of deliberate or concealed behaviour, HMRC can charge higher penalties of up to 100 percent of the tax owed.
- Interest: HMRC charges late payment interest at the current variable rate on any unpaid tax from the original due date until it is paid.
Is it possible to be excused for missing the deadline?
Yes, it is possible to be excused for missing the tax return deadline under certain circumstances, such as:
Natural disasters
Were you in the path of natural disasters (flood, hurricane, wildfire, etc.), making it impossible for you to get your filing done? You will need to document the event and any resulting changes to your personal or business situation, especially as it pertains to your appeal.
Serious illness or injury
If you are suffering from a severe illness that prevents or severely limits your ability to deal with your financial matters, you may be eligible for an extension. Examples of these may be being put in a hospital or being sick for a long period of time. You might need a medical record to back up your claim.
Death of a close relative
The passing of a spouse or at least a very close relative can bring emotional and practical problems which can postpone the process of filing a return. You might need to prove the loss with paperwork, for example, a death certificate.
Unexpected life events
There are things in life like divorce or needing to find a job again that make it impossible to file a return. It will be key to show how these occurrences impacted your financial management.
Errors by HMRC
If your late submission was a result of mistakes made by the tax authority, you may have grounds for an appeal. You will need to document the error and communicate it very well.
How to proceed after missing the self assessment tax return deadline
- Get your tax return filed: File your self-assessment tax return as soon as you can, even if it is overdue. You can do this online via the HMRC website or by submitting a paper return.
- Determine your tax liability: Compute the tax owed based on the information contained in your return. Doing so will give you a firm idea of what you owe and prevent you from needing to pay more.
- Settlement: Pay HMRC for any tax you owe to reduce the interest charged on it. You can pay online, via bank transfer, and through other allowed ways.
- Written communication: If you think you have a fair reason for not making the deadline, just talk to HMRC about your situation. They might waive or reduce penalties, depending on your case.
- Record management: Be sure to record every detail of your income, expenses, and any communication with HMRC. This can help if you want to appeal any penalties or prove your case.
- Talk to a professional: If needed, find an accountant or tax pro. They can offer commands on how to proceed and help you manage whatever twists and turns life might take.
How can an accountant help me deal with missing a tax return deadline?
An accountant can be your best ally when facing difficulties in meeting the tax return deadline. They can help you prepare and file your self-assessment tax return quickly and accurately to help avoid penalties. Accountants understand tax laws and can help find available deductions or reliefs to reduce your total tax liability.
They can also liaise with HMRC for you, outlining your situation and possibly persuading them to lower your penalties. In addition to that, an accountant can ensure that you not only meet deadlines but also come up with strategies to keep those deadlines bulletproof in the future, leaving you devoid of worries when it comes to your finances and reports.
Summary
A tax return deadline is serious and if you miss one, you can rack up a hefty penalty on top of the stress you have probably been feeling to get the return done. However, knowing the process and being able to seek a helping hand from an accountancy firm can reduce that burden during the tax period.
An accountant can help you navigate all these hurdles to ensure you get the numbers right and avoid penalties. Contact Reed Accountants to help you with your taxes so that you do not face issues again in the future. With the expertise of our team, we will help in the process of self-assessment and will help keep your financial peace in check.
