Tax Return Deadline Looms

January 2019
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Tax Return Deadline Looms

31st January is the deadline for filing tax returns in respect of income and gains received in the 2017-18 tax year. If you have not done so yet, you need to act fast to avoid penalties and interest for late filing and late payment. But who needs to file a return? What happens if you don’t and how could you be due a refund?

Self Assessment Basis

The principle behind self assessment is that it puts the onus on every taxpayer to know what they owe in tax or are eligible to claim relief on. It also works on the assumption that whatever happened in one year will be repeated in the future. If everyone was a tax expert and nothing ever changed in their lives this system would work well. In reality, few taxpayers fully understand tax law and many taxpayers face changes in their circumstances from year to year. Unfortunately ignorance of tax law is no defence and late payment or failure to file a return, when one is due, will result in fines and penalties being applied by HMRC or relief being lost.

The timetable is as follows:

Tax Year

6 April to 5 April

Deadline for filing return and paying tax due on previous year

31 January of following year (9 months later)

Deadline for payment on account for current year

31 July

Who Needs to File?

It is a myth that a tax return is not due just because HMRC have not requested one. The onus is on the taxpayer to act, not for HMRC to initiate.

Sometimes HMRC write to a taxpayer and tell them they no longer need to complete a self assessment return. This may sound like good news. However HMRC do not know personal circumstances and so this helpful advice should always be sense checked, rather than taken at face value.

The helpful letter from HMRC will not negate the imposition of fines or penalties for late filing / paying of tax due. Failing to claim reliefs due means they are lost. HMRC have no responsibility to proactively make taxpayers aware of reliefs and allowances unclaimed. Claims for refunds of tax overpaid can generally only be made over a four year period, so sense checking one’s tax code and reviewing whether tax has been overpaid or underpaid is advisable.

Common Reasons to Claim a Refund

If income has reduced during the tax year due to starting maternity leave, reduced hours or lower investment income than earlier years, pension contributions made from a bank account by the relief at source method, completing the payment of a student loan, one off investment losses, one off pension investments or charitable gifts, withdrawal of pension funds in excess of 25% tax free cash, a void period when letting a property, ceasing to be self-employed, claiming the marriage allowance, changing jobs or starting to receive the state pension.

Common Reasons Why You May Owe More Tax

Increased earnings, one off gains from investments, reduced regular pension contributions, withdrawing more than 25% tax free from a pension, paying more into your pension than the annual allowance, receiving more interest than the tax-free allowance, claiming child benefit when income exceeds £60,000, being employed in more than one role or self-employment.

Fines and Penalties

Missing the deadline attracts an automatic penalty of £100. This increases over time and if payment is also late. For example, filing and paying a £100 tax bill 6 months late would attract total penalties and interest of £816.

Make It Easier

To make the process less painful and hurried, it is a good idea to save every notification of income or gains / losses and communications from pension providers, investments, employers and HMRC in a file which can then be reviewed before the 30th June of the tax year following. Setting an annual review date gives time to consider whether any payment on account needs to be made by 31st July, to gather information on outstanding income, gains, losses and reliefs so that advice can be sought, and action taken well ahead of the 31st January deadline.

Where income has fallen, it may be possible to reduce any payment on account required by 31st July, thus assisting cash flow. However underpaying tax at this stage can also incur interest and penalties, so good record keeping is essential. Making a New Year’s Resolution to review your tax position before 5th April also gives more time to plan tax savings for the current year.

Kay Ingram
Director of Public Policy, LEBC

LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. Taxation advice is not regulated by the FCA.

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