Wisteria Accountants

Self-assessment is the completion of a tax return for HMRC. This return quite simply provides HMRC with all information with regards to your income tax status: how much you have earned from your income, any gains you have made on the sale of assets (known as capital gains), and any allowances or relief that you may be entitled to. Not everyone is required to submit a self-assessment tax return, but there are a number of groups for whom it is a legal requirement. Failure to do so could leave you liable for a penalty.

If your tax position is relatively straightforward you may not have to complete self-assessment, as all the tax you are liable for may have been paid through a PAYE (Pay As You Earn) system through your employment. However, there are certain groups with a more complicated tax situation that will be required to complete the tax return. Anyone who is self-employed, whether this be as a sole trader or as part of a partnership, will be required to file a return with HMRC. In addition, those holding a directorship of a limited company are required to complete self-assessment, though there are certain exemptions. For example, the directors of a non-profit organisation, such as a charity, aren’t required to file as they are receiving no benefit from holding their office. In addition, those receiving income over certain levels from a number of different sources will be required to file. You will also probably be required to file a return if you receive income that is not taxed at source, such as rental income.

HMRC should contact you by letter if they require you to file a self-assessment tax return, though the deadlines for when this should be submitted vary depending on how you send it. Paper returns must be received by HMRC by midnight on October 31st, while electronic filings must be received by midnight on January 31st. There are certain circumstances where the deadline can be extended, namely if you receive the letter informing of the requirement from HMRC after a certain date. For online returns, this is if the letter is received after October 31st. It is important to note that if looking to file your tax return online you need to request a Government Gateway code from HMRC, in order to allow your submission of the return. This can take a number of weeks to arrive, so it is important that you request this in-time for the deadline. This is your responsibility, and not one of the reasonable excuses for missing the deadline if it is your fault.

There are varying penalties for missing the self-assessment deadline with HMRC, which tend to increase with the length of time after the deadline the form is submitted. The current HMRC penalties for late filing are as follows:

• One-day late: £100 penalty, regardless of whether any tax is owed to HMRC.
• Three months late: £10 extra penalty for each extra day you are late, up to a 90-day limit and a £900 penalty. This is paid in addition to the fixed payment above.
• Six months late: The highest of £300 or 5% of the tax due.
• Twelve months late: £300 or 5% of the tax due – in extreme cases this may be up to 100% of the tax due. This is in addition to previous penalties.

The payments for any tax due must be paid by 31st January after the end of your tax year.

If you have any queries on self-assessment, please contact us on 020 8952 0140.