Self-Assessment is a mandatory provision which has to be fulfilled by all self-employed taxpayers. The annual deadline for submitting the online Self-Assessment and paying any tax owed is midnight on January 31st. Most self-employed people choose to file their Self-Assessment online. However it is possible to complete this process in the old-school way and that is through paper forms. But it is compulsory that HMRC receives the paper forms by October 31st. If anyone misses the deadline for filing the returns and fails to pay the due tax on time, they will have to face fines and potential extra penalties.
Anyone who is required to file a return but misses the deadline will receive a 100 pound fine from HMRC. This fine will be added to the accounts of those who have online accounts. The fine is imposed regardless of whether tax is owed or not. If the returns are not filed within three months that is by the end of April, then HMRC can impose an additional 10 pound daily fine for the next 90 days, increasing the total penalty from 900 pounds to 1000 pounds. Additional penalties are imposed after 6 and then 12 months and these vary based on the amount of tax owed usually in the cases of large outstanding amounts. Furthermore, interest on unpaid taxes will also be charged in addition to the above fines.
If the payment of tax is 30 days late, the fine amount will be 5% of the tax due. If the payment is 6 months late, then the fine will be 5% of the tax due at that particular date. If the payment is late by a year, then the fine amount will be 5% of the tax due at that date. HMRC operates a system called “payment on account” for those who pay their tax through Self-Assessment. This means that the tax due is often 50% higher than expected and has to be paid when the Self-Assessment bill is more than 1000 pounds. This measure by the HMRC is mainly to prevent arrears in payment of tax.
HMRC has a policy where it will waive the late-filing penalty for those who have a “reasonable excuse”, but this is done at the discretion of the officials. Excuses like the death of a close relative, illness and system errors are accepted. The most common reason for missing the deadline is the problem with HMRC’S online services and it happens in most instances due to server crashes during filing. Those who want to file an appeal against a penalty have to fill out a SA370 form.
Anyone who misses the deadline has to get on the move to pay the due immediately. The fines and interest amounts will keep building up if the outstanding tax is not paid. Those who have registered for Self-Assessment online have to submit their financial information for the required tax year such as annual accounts, details of investment profits, pension contributions and so on. The registration process usually takes several days as HMRC has to send an activation code by post.
Registration for Self-Assessment is the trickiest part of the process and once this is done everything else will fall into place. A username and password has to be kept for the service. Proper records should be maintained for at least 22 months after the end of the tax year the tax return is filed for. This is to prevent discrepancies and arrears in payment. The process will happen smoothly if the relevant information is kept in a safe place. People should make sure to file their returns well in advance of the deadline so as to avoid unwanted penalties. The return can be filed any time after the tax year ends on April 5th.