This December and January I have noticed far more people worried about the fact that they have not submitted their 2011/12 Self Assessment Tax Return. Why, I wonder, are there more people worried than before?
I have a few thoughts:
- Last year the 2010/11 Returns were the first where penalties stuck even if your late return showed no tax due.
- Late filers got stung with £1,300 (which won’t go down) in fines for being 6 months late – not something you would incur twice!
- Rarely a week goes by without a big tax story in the news.
- January 2013 saw the changes to child benefit – bringing tens of thousands of people into annual Tax Returns for 2012/13.
- In 2012 HMRC finally took a high-profile tax evasion trial – Harry Redknapp – albeit HMRC lost. See youtu.be/HsjAOdIDz9g
Thankfully even in the last few days of January, some tax advisers and accountants (ourselves included) are sufficiently organised that they can still get your 2011/12 Tax Return in on time – saving you the £100 initial penalty.
Occasionally I hear people say ‘Rather than pay an accountant I think I will take the fine and not bother sending in a form.’ Let me set out what will happen to them.
1. Probably sometime in late February 2013 HMRC will issue a £100 penalty. This does not come down if little or no tax is due.
2. Once the Return is 3 months late another penalty system starts. This time it’s a DAILY penalty of £10 per day, for the next 3 months. So that’s £900 by 31 July 2013. Plus that first £100.
3. Then once the return is 6 months late a further penalty applies. It is at least £300. If, once the tax is known, 5% of the tax is more than £300 then the penalty is raised to 5% of the tax. So by August 2013 a late filer has at least £1,300 of non-negotiable penalties to pay.
4. When the Return is eventually submitted, then there are tax-based surcharges and interest.
5. If the right amount of tax was not paid on 31 January 2013 then interest is charged until it is paid.
6. If all the 2011/12 tax was not paid by the end of February 2013 then will add a surcharge of 5% of that unpaid 2011/12 tax.
7. Further 5% surcharges kick in after 6 months and 12 months.
So all things considered, avoiding sending in your Tax Return is short-sighted and could be very very expensive. HMRC will still hound you for the Return, and the penalties will bring tears to your eyes. Your other half will be pretty pissed off too!
Remember that after October you must file your Tax Return online or else the above penalties apply for a later paper return. To file online you must have received, in the post, a User ID from HMRC. Apply now and it will arrive within a couple of weeks!
Note that it is impossible for an individual to file their own Return online if they haven’t got this User ID and online access to their HMRC account.
On the other hand accountants with their fancy software can file a Tax Return for nearly anyone online, even if HMRC has not yet received an authorisation for them to be your accountant. This is the solution for many people.
What should you do then?
a) If you have the online User ID and password – then file the Return by 31 January 2013, midnight. Or go to a professional with it – see (d) below.
b) Estimate some figures if you have to. Tick the box 20 on page 6 to say some figures are estimated or provisional. Enter in Box 20 on page 6 why they are estimated and when (if ever) you will get more accurate figures.
c) If you haven’t got your online access stuff then go to a professional who has the software to file for you, and the time to help you before the deadline.
d) If you want professional help with your return, and have the online codes, then bring them along to the accountant. By you logging into your account and putting in their special (Government Gateway) reference, then by the next day or two they will be fully able to talk to HMRC about your case.
e) If you think you owe tax and have not got a payslip, still send HMRC what you think you owe. This will save you interest and surcharges, even if something prevents you filing the return at the moment. You would still get the penalties. See here for how to pay www.hmrc.gov.uk/payinghmrc/selfassessment.htm
Don’t get hit with nasty penalties by the tax-man. You pay them enough already! Take action before 31 January 2013. It’s worth it.
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.