Date posted: 4th Dec 2023
By Lee Watson, tax partner
In my 20+ years working in tax (I know, I don’t look old enough….) some of the most frequent questions I get asked by clients, concern tax returns.
Some of the questions are:
- What is self-assessment?
- How are they completed and when are they due?
- What happens if I don’t file a tax return?
- What happens if I get something wrong?
- Do I need to complete a tax return?
- What are the benefits of using an accountant?
- HMRC won’t know, will they?
What is self assessment?
In essence, with self assessment, you are telling HMRC what you owe in tax.
However, to arrive at that, you need to make sure that you are reporting the appropriate sources of income, claiming the correct reliefs and expenses as well as if applicable, considering capital gains (and capital losses!).
Each tax return is different, as it depends upon individual circumstances. For the unrepresented taxpayer, it can be difficult to know exactly what you need to report and when you need to report it.
How are they completed and when are they due?
Tax returns can often be complex for unrepresented taxpayers, especially those that battle with the HMRC free software. Luckily, we have bespoke tax software, so we can take the stress away from you.
You can submit your tax return on paper to HMRC but this needs to be done by 31 October following the end of a tax year. If you file electronically, you can submit by 31 January following the end of the tax year.
What happens if I don’t file a tax return?
Penalties, penalties and penalties.
If you miss the filing deadline, you will receive an automatic £100 late filing penalty. Where the delay continues, you could be subject to daily £10 penalties and then further penalties if the delay continues based upon a percentage of the tax that is ultimately found to be due.
If you do continue to ignore the filing of the tax return, penalties can continue to increase and HMRC can even issue a determination, which is an estimate of the tax due. The collection of the tax arising from a determination is legally enforceable and can only be overridden by submitting the tax return.
In addition, the late payment of any tax, also carries late payment interest and late payment penalties.
In other words, try not to delay filing or paying HMRC!
If you have a reasonable excuse for not filing the tax return, by the deadline, you may be able to appeal any penalties. We have a good success rate with HMRC and penalty negotiations.
What happens if I get something wrong?
If you make an error, putting it right in a timely fashion is critical.
The longer that there are delays between discovering an error and putting it right, the more likely HMRC are to charge higher penalties.
My advice would be to correct an error as soon as it is discovered as HMRC will take a fairer view on any penalties, however any interest due must still be paid.
Purposely not declaring income is tax evasion and will be penalised significantly by HMRC, with potential criminal ramifications.
Do I need to complete a tax return?
Although there are some anomalies, generally you must file a tax return if you fall into one of the below categories.
- You are self-employed and earned more than £1,000.
- You are a higher-rate taxpayer and had a total income of over £100,000.
- You are a partner in a partnership or LLP.
- You are a higher-rate taxpayer and your household received child benefit.
- You rented out a property (even if you do not make a profit).
- You received a certain amount of income from savings or investments.
- You own a business and receive income in the form of dividends.
- You received income from overseas.
- You have capital gains or losses to declare.
These are the most common scenarios but there may be others. It is best to check!
What are the benefits of using an accountant?
Filing a tax return which can often take a lot of time and resources. Seeking expert support to file your tax return can have many benefits for you.
- Peace of mind.
As qualified tax professionals we deal with thousands of tax returns every year and will give you peace of mind that your return will be fully compliant with tax legislation and you have maximised any tax savings.
- Potential tax savings.
As tax advisers, we often claim reliefs that you may not have been aware of, thus saving you money as well as time.
- Avoid fines and penalties.
Filing late or filing incorrectly can lead to fines and penalties from HMRC. Our team can minimise this risk by ensuring that your self-assessment tax return is completed in good time and with a high level of accuracy.
- Filing early can bring benefits.
Many taxpayers leave their tax return to the deadline (over 600,000 were filed on deadline day 2023) with some taxpayers under the belief that if you file your tax return early, HMRC will ask you for the tax earlier. That is not the case as you could file your tax return on 6 April and HMRC would not ask for the tax immediately. The tax payment dates are the same as filing on 31 January, so it is best to plan early.
- Make sure you know who you are dealing with.
As I have said in an earlier blog make sure you know who you are getting into business with. It is not well known that you do not need to possess a single accountancy or tax qualification to call yourself an accountant or tax adviser, please check their credentials.
At Clive Owen LLP, our team is made up of qualified chartered accountants and / or chartered tax advisers (in some cases the team members have both qualifications). Our trainees all set out to attain the chartered tax adviser qualification, as a minimum, thus ensuring high standards if you choose us as your accountant.
Self Assessment Tax Returns continue to prove troublesome for the unrepresented taxpayer, and with the ever-changing tax legislation, it is beneficial to seek our expert advice particularly when filing your self assessment tax return.
HMRC won’t know, will they?
Finally, a few times, potential clients have asked whether HMRC will know that they have undeclared income.
HMRC do have a “super computer” that will link into other Government computer systems such as Companies House and HM Land Registry. It can check if you have more than one home registered with HM Land Registry – the implication being that you may have rental income from a second home.
HMRC are believed to have the ability to access information from eBay, Airbnb and banks to check for investment income sources. There are also exchanges of information between countries, should you have overseas income.
It is even thought that the HMRC computer can check social media, such as Facebook, to check to see whether your lifestyle is not consistent with your income.
So yes, HMRC may well know and that can lead to a whole world of trouble.
You can contact me or my team, to assist with all tax matters from compliance to advisory.
