It is a fundamental part of the self-assessment system that responsibility lies with you to file returns and pay the right amount of tax, at the right time – you must not wait for the Inland Revenue to ask. Let FWD do it for you.
The completed full return has to be submitted to the Inland Revenue by 31st January the following year (the filing date). If you don’t want to work out your own tax bill, you must send the tax return to the Inland Revenue by 30th September. However, you should note that your return must be completed as far as the total income on which tax has to be paid. Figures must be given for every item, even if only estimates. It is not possible to enter question marks or leave the tax inspector to decide whether an item is taxable or not. The only section that can be left for the tax office to complete is the actual calculation of the tax due on your total income. There are automatic penalties for late filing of tax returns. Failure to submit the tax return by the 31st January incurs a £100 penalty. If it has still not been returned six months later, a further £100 will be charged. However, the penalties charged cannot exceed the amount of tax due. In the most serious cases there are provisions for penalties of up to £60 a day.
Amendments, Investigations, and Record Keeping
You have one year from the filing date to make any amendments to the return. The Inland Revenue may correct obvious errors or mistakes within nine months of receipt of the return. Within a period of one year from the date the tax return was due to be submitted (or when it actually was submitted, if later), the Inland Revenue will have a right to make enquiries to check that the tax return has been correctly completed. No reason for the enquiry need be given. All records relating to the return should be kept during this one year period. If trading or rental income is involved, all records should be kept for a further four years.
If a return is not submitted by the due date, the Inland Revenue can, within five years of the filing date, make an estimate to the best of its information and belief of the amount of tax due. This amount of tax will be payable without appeal, but will automatically be superseded when the return and self-assessment are sent in.
Payment of Tax
Payments on account of Income Tax (and class 4 National Insurance Contributions) for a particular tax year will be due on 31st January in the tax year and 31st July following the end of the tax year. These payments will be based on one half of the total Income Tax liability (less any tax deducted at source) for the previous tax year. You have the right to reduce payments on account if you believe that the Income Tax for the current year will be lower than that for the previous year. However, you may be charged interest if the reduction is more than it should be. Payments on account will not be required where each payment works out less than £250.
Surcharges and Interest
An automatic surcharge of 5% will be levied on any tax outstanding on the 28th February following the January deadline, and a further surcharge of 5% will apply to any tax still outstanding on the 31st July. There is a right of appeal against the surcharge on the grounds of reasonable excuse. In addition, interest will run on tax (and surcharges and penalties) paid late, from the due date of payment to the actual payment. The Inland Revenue will pay interest on amounts overpaid, from the date of payment (or the due date if later) to the date of repayment.
Self Assessment for employees
For employees, self-assessment is not too complicated. The PAYE system means most employees should pay the correct amount of tax at source. An employee with relatively straightforward tax affairs is unlikely to be asked to complete a tax return.
The main cause of under or over payments of PAYE is actual benefits in kind being different from the estimates included in the tax code. If there are under payments of tax, they may be collected by direct demand or if modest, carried forward as an adjustment to their tax code for the next tax year but one. Self assessment allows up to £1,000 to be carried forward in this way, provided the Inland Revenue is given all the relevant details by 30th September following the end of the tax year.
So that employees can complete their tax returns properly, information deadlines are imposed on employers:
- Forms P60 must be provided to employees by 31st May following the end of the tax year.
- Copies of forms P11D and P9D must be provided to relevant employees by 6th July following the end of the tax year.
- Form P45 has a part for the employee to retain.
Table of key dates
30th December 2018
Tax return for 2017/18 to be submitted online, if you want a PAYE underpayment of less than £3,000 collected via your 2019/20 PAYE code. Providing you have enough PAYE income for the tax to be collected, you don’t end up paying 50% of your PAYE income in tax and you don’t end up paying twice as much tax as you normally do.
31st January 2019
Tax return for 2017/18 to be submitted with self-assessment. Payment of balance of income tax for 2017/18, Payment of capital gains tax for 2017/18. First payment on account for 2018/19 income tax (normally half the total 2017/18 liability, adjusted for tax deducted at source).
31st July 2019
Second payment on account for 2018/19 income tax
30th December 2019
Tax return for 2018/19 to be submitted, if you want a PAYE underpayment of less than £3,000 collected via your 2020/21 PAYE code. Providing you have enough PAYE income for the tax to be collected, you don’t end up paying 50% of your PAYE income in tax and you don’t end up paying twice as much tax as you normally do.
31st January 2020
Tax return for 2018/19 to be submitted with self-assessment. Payment of balance of income tax for 2018/19, payment of capital gains tax for 2018/19. First payments on account for 2019/20 income tax (normally half the total 2018/19 liability, adjusted for tax deducted at source).
31st July 2020
Second payment on account for 2019/20 income tax. … and so on.
Please contact us if you would like help with your self-assessment returns.