Self assessment tax returns – also known as personal tax returns – are filed for the period 6th April through to 5th April each year.
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Anyone completing a tax return needs to declare income from all sources, including any dividends, bank interest, salary, benefits, pension and property.
Who needs to complete a self assessment?
You need to complete a tax return if you have income that has not been taxed at source or not taxed at the correct rate. This would include the following income sources:
- self employment
- being a company director
- if your income was over £100,000
- income from abroad that you needed to pay tax on
- you or your partner claimed child benefit while earning more than £50,000 a year
- living abroad while having a UK income
- earning £2,500 or more in untaxed income
Claiming tax relief
Tax relief means that you either:
- pay less tax to take account of money you’ve spent on specific things, eg, business expenses if you’re self-employed; or
- get tax back or repaid in another way, eg, into a personal pension.
You will be awarded some types of tax relief automatically but must apply for others. If you have set up your own limited company, there are a number of business related expenses you can claim relief for.
HMRC refunds
If you are due a refund from HMRC, you can complete a tax return for the following:
- Costs incurred running your business if you’re self-employed (a sole trader or partner in a partnership)
- Travel expenses and equipment you must buy for your job if you’re employed and use your own money to make the purchase
- Charitable donations made through your limited company
- Private pension contributions made as a higher or additional rate taxpayer, or through a scheme that isn’t set up for automatic tax relief
Company directors must keep records for five years after the 31st January following the tax year concerned. Failure to do so could lead to penalties.
Paper and electronic tax return deadlines
If you receive a notification to complete a tax return, you must do so and submit it to HMRC by these assessment deadlines:
- 31st October following the end of the tax year for a paper return
- 31st January following the end of the tax year for an electronic return
The payment deadline for your tax liability is also 31st January.
Payment on Account (POA)
If your tax liability is more than £1000, you will need to make a payment on account. One payment would be due by 31st January and the second by 31st July.
Each Payment on Account (POA) is 50% of the prior tax year’s income tax and Class 4 NIC liability less tax suffered at source. A claim may be made to reduce POAs.
The payment on account will be offset against your next self assessment liability. This means if your earnings in the next tax year are the same, this would mean you have settled the liability via payment on your accounts. If this is the case, the next self assessment will only have a payment on account to pay.
Penalties
You will receive a penalty if you need to file a tax return and miss the deadline for submitting it or paying your bill.
Late filing penalties are as follows:
| Period | Penalty |
| Up to three months late | £100 |
| Over three months late | As above, plus an additional £10 per day penalty for a maximum of 90 days |
| Over six months late | As above, plus an additional penalty of the higher of 5% of the tax or £300 |
If payment is late, penalties will be incurred starting 30 days after the due date:
| Period | Penalty |
| No more than three months late | 5% of the unpaid tax |
| Between five and eleven months | As above, plus 5% of the unpaid tax at five months |
| Over six months late | As above, plus 5% of the unpaid tax at 12 months |
Errors
If the tax return filed is inaccurate, a penalty may be imposed. If a tax return contains more than one error, a penalty may be charged per error.
The amount of the penalty will depend on the potential lost revenue to HMRC as a result of the inaccuracy in the tax return.
The errors would be categorised as:
- Careless if up to 30%
- Deliberate but not concealed if up to 70%
- Deliberate and concealed if up to 100%
Making errors when completing your tax return can result in costly penalties so it is important to get your self assessment right.
Cobia Accounting are experienced in filing self assessment tax returns for clients from self employed individuals through to small businesses. If you need assistance completing your self assessment tax return or would like to find out more about the accounting services we offer, contact us today.