Avoid the penalties - tax return deadline fast approaching
With less than one month to go, millions of customers have yet to file their Self-Assessment tax return paperwork for 2021/22 tax year, according to a recent report from HM Revenue and Customs (HMRC). The report revealed that of the 12 million customers anticipated for the 2021/22 tax year, around 5.7 million Self-Assessment customers had still not submitted their tax return forms.
With the 31 January deadline fast approaching, many customers could face penalties for a late submission.
What is Self-Assessment?
Self-Assessment is the process that details your undeclared income, including self-employed income, dividend income, capital gains and any other income during that tax year, to HMRC. This is done by completing a tax return form and sending it directly to HMRC.
This is most commonly done by self-employed people and, depending on your personal self-employment circumstances and the type of form (i.e. physical or digital), you may have to calculate your own tax liability to work out what you owe.
Irrespective of employment status, if you have received any untaxed income before the deadline of that tax year, you may need to complete a tax return.
The Tax Return Deadline
As the deadline approaches, HMRC has been warning customers that they must submit their tax return before midnight 31 January. This now can only be done with an online form, as the tax year’s deadline for paper forms was 31 October 2022.
If you don’t file your tax return correctly by the deadline, you will be sanctioned with a penalty depending on how late you file your return. This penalty will begin at an initial £100 fixed fee and progress as follows:
- After 3 months, daily penalties of £10 will start, up to £900 in total.
- After 6 months, you will be sanctioned for 5% of the total tax due or £300, whichever is greater.
- After 12 months, you will be sanctioned for a further 5% of the total tax due or £300, whichever is greater.
Additionally, the interest rate that HMRC charges on unpaid tax recently rose to the highest it has been in 14 years at a rate of 6%. This is in stark contrast to the interest rate paid to those that are owed money by HMRC, which is at a rate of only 2.5%. Many have criticised this as an example of ‘one rule for us, another rule for them’ when it comes to taxation policies.
That said, HMRC has made it clear that for those that can demonstrate a genuine reason why they cannot make the deadline, they will be ‘lenient’ in their penalty process. The penalties mainly exist to punish deliberate tax evaders and those who persistently fail to complete their tax returns.
HMRC’s Director General for Customer Services, Myrtle Lloyd says "There is less than one month for customers to submit their tax returns and my message to those yet to start is: don’t delay, do it online. HMRC provides lots of useful information to help you get started. Visit GOV.UK and search ‘Self-Assessment’. "There are many reasons which mean we must pay tax, there are also products and means by which we can reduce the final amount of tax that we pay.
Our tax planning services include certain products, allowances and guidelines to ensure your money is working its hardest and to ensure the tax you pay is ultimately a fair, yet minimal, amount.
If you’d like to learn more, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team to find out more.
Please note: The FCA does not regulate tax advice. This article is intended for general information only and should not be taken as individual financial advice.