The 31st January deadline for submitting your tax return has now passed and I am pleased to say that the vast majority of our clients submitted their returns by the due date. But anyone who has received a notice to submit a tax return but has not yet done so must act quickly to avoid things spiralling.
They will now receive an automatic penalty of £100 but that is only the start. If the return has still not been submitted by 30th April then the penalty charged will increase by £10 per day for the next 90 days when an additional £100 is charged. Finally a further £500 is charged after another 6 months, resulting in total penalties of £1,600 after 12 months.
So what must be done?
Firstly, only people who meet certain criteria need to complete a tax return. Those criteria include, amongst others:
- Being self employed at any time in the tax year, even if only for a short period
- Being a company director at any time in the year, even if the company was dormant and you received no income from it
- Receiving untaxed income over a certain amount
- Receiving income in excess of £50,000 and receiving Child Tax Credit
If you think that you do not fit those criteria then you can ask the tax office to withdraw the notice to submit a return. If they agree then they will withdraw the notice and also cancel any penalties that have been charged. Alternatively, you need to submit the outstanding return as soon as possible.
Secondly, if the tax office does not cancel the notice then you should consider whether you have a reasonable excuse for not sending in the return on time. A reasonable excuse could be:
- The death of a partner or close relative shortly before the deadline
- You were unexpectedly hospitalised shortly before the deadline
- You had a serious or life-threatening illness
- Your computer or software failed just before or while you were preparing your return
- There were service problems with HMRC online services
- A fire, flood or theft prevented you from submitting your return
- There were unpredictable postal delays
Unlikely to be accepted as a reasonable excuse are:
- You relied on someone else to submit your return and they failed to do so
- You found HMRC’s online system too difficult
- You were expecting a reminder from the tax office and didn’t get one
The deadline for paying any tax due on the tax return is also 31st January. Interest is always payable, calculated on a daily basis, on any tax unpaid on the due date, and this will not be reduced even if you have a reasonable excuse. A late payment penalty of 5% is charged if the tax remains unpaid after 30 days, with a further 5% penalty after 6 months. If you are successful with appealing against a late submission penalty then this will normally be accepted as a reasonable excuse for late payment, and the penalties will be cancelled. Please note, however, that lack of funds is never accepted as a reasonable excuse!