For one self-employed builder, it was the loss of his beloved pet goldfish. A Kent-based financial services firm reasoned that the business didn’t really do anything. And one London accountant said he’d been too busy filing other people’s to get around to his own. We’re talking about self-assessment tax returns, and these are just some of the more eccentric excuses that the tax man has heard for late filing. But the deadline for submissions looms large on January 31, with almost 11 million individuals and businesses required to submit their tax paperwork by that date or risk a £100 fine – and much more if their tax debt remains unpaid.
HM Revenue and Customs estimates that about six million people have filed already this year, and about 80,000 returns are flooding into the tax authorities every day throughout January. Some sad souls – more than 1,500 of them – even took advantage of the lull before lunch to file their returns on Christmas Day. But, about seven per cent of those eligible to submit returns missed the deadline last year, and 578,000 only just made it by filing their returns on the last day of January in 2013.
So, what is the real significance of the midnight deadline on January 31, and what are the rules hiding in the small print of the letters HMRC sent out to those eligible to fill in a return in April or May of last year? The last day of this month is the deadline for:
- Online filing of self-assessment tax returns for the tax year ending April 5, 2013. It’s already too late to file a paper return if you haven’t already done so, which means that registering online is the only option at this late stage.
- Paying any remaining tax owed for your 2012-13 self-assessment period.
- The first self-assessment payment on account for 2013-14.
In practical terms, the date that you need really to be worried about is January 21, ten days before the actual deadline. The online registration process can take up to seven working days to complete – hence the ten day lag, including the weekend. Once you’ve registered online, HMRC sends out an activation code through the post to taxpayers. Therefore the tax authorities have earmarked January 21 as the latest date by which you should have registered in order to have enough time to complete all the necessary steps.
The penalties for submitting your return late are:
- One day late incurs an automatic £100 fine, even if you don’t owe any tax or have paid the tax you owe.
- Three months late results in a fine of £10 per day, which could mean a total penalty of £900 for the full 90 days. This is on top of the initial £100, so a late filer would already be out of pocket to the tune of £1,000.
- Six months late filing will see a further £300 fine or five per cent of the tax due, whichever is greater. Again, this is in addition to both previous fines.
- A full year late warrants another £300 fine or five per cent of tax owed, whichever is the larger figure, as before. If the tax office is being particularly tough, it may ask for 100 per cent of the tax owing, and it can impose even greater financial penalties.
So, the simple message is to get moving now to avoid being one of the tardy types who ends up paying more money to the tax man than is absolutely necessary.
There are some tips that HMRC offers to help people understand and complete the necessary processes more effectively:
- Make sure that you have the activation code to hand that was mentioned previously, the one that would have been sent in the post after you registered online. This is known as your Unique Taxpayer Reference (UTR), is ten digits long, and is followed by a ‘K’. An example would be 1234567890K.You’ll need to quote this number on your tax return – don’t make the common mistake of confusing it with your National Insurance number. Such hiccups can cause long delays and could result in one of those unwanted fines.
- If you have lost your user ID or password, you can go to HMRC’s online help page to apply for new access details.
- Make sure that you have all of the relevant financial information to hand, including any interest you may have earned on bank, building society or other savings accounts – a common omission. But remember that ISAs are tax-free, so you can discount these from your calculations.
- Check that you’re not affected by recent changes to child benefit if you have a family. If someone in your household earned more than £50,000 and you received child benefit between January 7 and April 5, 2013 you may be eligible to repay part of the benefit payments. If you have a high earner in the house who earns over £60,000, all of the child benefit you received in those months early last year will be repayable. Get more information about these recent changes to the system on the HMRC website.
- If you’ve received no communication from the tax authorities at all, but think that you should be filing a self-assessment return you can check on HMRC’s website to see if you need to make a submission.
When dealing with what can look like the minefield of tax legislation, talk to your accountant to ensure you’re fulfilling your tax obligations. The professional number cruncher has become the average small business owner’s most trusted adviser in recent years, according to research from accounting software firm Sage. You have to take responsibility for keeping accurate records of your sales and takings, expenses, mileage, payroll if you have employees, and things such as rent books, hire purchase details and stock inventories. But your accountant is the person who can help you to make sense of all of this information.
The clock is ticking, but it’s not too late to get your submission in to the tax office now. Avoid a fine, and be on time. And make a vow that next year you won’t leave sorting out the inevitable hassle of your tax return so late.
Image courtesy of Grant Cochrane / FreeDigitalPhotos.net