An Introduction to Self Assessment Tax
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Tax Returns
The completed full return has to be submitted to the Inland Revenue by 31 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 in by 30 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 31 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.
Determinations
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 This amount of tax will be payable without appeal, but will automatically be superseded when the return and self-assessment are sent in.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 31 January in the tax year and 31 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 at 28th February following the January deadline, and a further surcharge of 5% will apply to any tax still outstanding at 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 drastic. 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.
Tax Codes
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 30 September following the end of the tax year.
Information deadlines
So that employees can complete their tax returns properly, information deadlines are imposed on employers:
- Forms P60 must be provided to employees by 31 May following the end of the tax year.
- Copies of forms P11D and P9D must be provided to relevant employees by 6 July following the end of the tax year.
- Form P45 has a part for the employee to retain.
Table of key dates
30 September 2010
Tax return for 2009/2010 to be submitted if you don't want to work out your own tax or if you want a PAYE underpayment of less than £2,000 collected via your 2011/2012 PAYE code.
31 January 2011
Tax return for 2009/2010 to be submitted with self-assessment.
Payment of balance of income tax for 2009/2010
Payment of capital gains tax for 2009/2010
First payments on account of 2010/2011 income tax (normally half the total 2009/2010 liability, adjusted for tax deducted at source).
31 July 2011
Second payment on account of 2010/2011 income tax
30 September 2011
Tax return for 2010/2011 to be submitted if you don't want to work out your own tax or if you want a PAYE underpayment of less than £1,000 collected via your 2012/2013 PAYE code.
31 January 2012
Tax return for 2010/2011 to be submitted with self assessment
Payment of balance of income tax for 2010/2011
First payment on account of 2011/2012 income tax (normally half the total 2010/2011 liability, adjusted for tax deducted at source).
31 July 2012
Second payment on account of 2011/2012 income tax. … and so on.
Please contact us if you would like help with your self-assessment returns.
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