1. Self-assessment tax return and compliance
Many taxpayers struggle to understand the complex tax returns and complete them correctly. Ongoing changes to tax legislation mean that taxpayers risk incurring more penalties through failing to complete their returns, on time or correctly.
Our comprehensive personal tax service is a natural complement to our private client service. As a firm of tax advisers, we’ll help you pay the right amount of tax each year.
We relieve you of the self-assessment burden and save you time, worry and money by handling this process for you.
We will do all the necessary computations, liaise with HMRC and submit your return.
We also offer advice on how you can minimise your tax liability while submitting your return. We can also offer you fee protection insurance to provide cover against HMRC tax investigations in making smarter financial decisions.
Key administrative points for you to be aware of in relation to filing your tax returns
The deadlines for paying your tax bill are:
- 31 January – for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on account for the current tax year.
- 31 July – for your second payment on account for the current tax year.
You must ensure that you pay HM Revenue & Customs (HMRC) by the deadline. You will be charged interest and may have to pay a penalty (see below for further details) if your payment is late.
Details on how you can make a payment to HMRC for your tax bill can be found on HMRC’s website at:
You should note that if the deadline for payment falls on a weekend or bank holiday, you must make sure that your payment reaches HMRC on the last working day before (unless you are paying by debit or credit card or by Faster Payments).
You will require HMRC’s bank details for making tax payment via online or telephone banking, CHAPS or Bacs – HMRC has two bank accounts into which your payment can be made. Normally, your tax bill should inform you which HMRC’s bank account to pay into. If you do not have a bill, or are not sure, use HMRC Cumbernauld.
HMRC will levy a late filing penalty if you need to send in a tax return and the deadline for filing the return is missed. An automatic late filing penalty of £100 will be payable if the return is not submitted by the due date. This penalty will be payable regardless of whether you owe additional tax, have no tax to pay, have already paid any tax due (e.g., via PAYE), or are in a refund position.
If the return remains outstanding more than three months after the filing date, HMRC can apply daily penalties of £10 per day. In such an instance, HMRC will put you on notice that you are liable for the further penalty of £10 per day for every day the return remains outstanding over a period of 90 days. Normally this would run from the date specified in the HMRC notice (generally, 1 May) until either the Return is filed or for a period of 90 days; whichever is shorter. The maximum additional penalty would be £900.
Should your tax return still not have been received by HMRC more than six months after the filing date, HMRC will levy an additional tax-geared penalty of £300 or five per cent of the tax liability still outstanding if this is higher.
If the return is over 12 months late, a further tax-geared penalty is payable equal to £300 or a further five per cent of the tax liability outstanding if this is higher. The tax-geared penalty levied if the return is more than 12 months late depends on the behaviour of the taxpayer and whether the Return includes foreign income and gains.
HMRC can also levy additional penalties of up to 200% of the outstanding tax liability if the tax return is over 12 months late and they believe the reason for failing to file a tax return is because the taxpayer is deliberately withholding information that would enable HMRC to assess the tax due.
3. Late payment penalties - What if I pay my tax bill after 31 January following the end of the tax year?
HMRC will levy interest charges should payment not be made by 31 January following the end of the tax year.
In addition, HMRC will levy a penalty of 5% of the balance payable by 31 January should this remain unpaid after 30 days of the due date of 31 January. A further 5% penalty will be levied if the balance payable by 31 January still remains unpaid as of 31 July (i.e., after 6 months of the due date). An additional 5% penalty will be levied if the tax payable by 31 January still remains unpaid as of 31 January of the following year (i.e., after 12 months of the due date).
Where a taxpayer’s liability exceeds £1,000, then two payments on accounts will fall due for the subsequent tax year. Payment on accounts are due in January and July with each payment being half your previous year’s tax bill. Capital Gains Tax (where applicable) is ignored when computing the payment on accounts.
For example, HMRC will take the view, that your 2023-24 income level will be similar to tax year 2022-23.
If your income in 2023-24 turns out to be higher and the payment on accounts were insufficient, then any extra tax due will be payable in January 2025.
If you expect your 2023-24 income to be significantly lower than 2022-23, then a claim to reduce the payment on accounts can be made on your tax return. This can be an issue, however, if it transpires that an excessive payment on account reduction has been applied, as late payment interest (currently 7%) gets charged on the excessively reduced amount.
Further information concerning payment on accounts is located at the following https://www.gov.uk/understand-self-assessment-bill/payments-on-account
If the tax payment due for the tax year is less than £3,000 and the taxpayer is employed or receives a pension, the taxpayer can ask HMRC to collect the tax via the taxpayer’s pay as you earn (PAYE) tax code rather than making a payment. For unpaid tax of less than £3,000 to be collected via the taxpayer’s PAYE code, the Tax Return must be submitted by 31 October (paper copy) or 30 December (online filing) after the end of the tax year. The collection of unpaid tax via PAYE is automatic although this can be disapplied.
In certain circumstances, HMRC will have collected underpayments that have arisen in previous tax years, or will have deferred estimated underpayments to later years, by making an adjustment to a taxpayer’s PAYE Notice of Coding. These adjustments impact the final tax liability due for the tax year and can lead to unexpected additional payments due. As a result, interest and even penalties may potentially be assessed.
If Telic Advisory Limited are aware of such adjustments at the time your tax return is prepared, these will have been accounted for. However, if you believe that there are adjustments in respect of your Notices of Coding that are not detailed on your return, please advise your Telic contact, and provide a copy of the relevant PAYE Notice of Coding as soon as possible.
There is a legal requirement to retain records relating to the Self-Assessment Tax Return. How long you should keep their records depends on whether you send your tax return to HMRC before or after the deadline of 31 January.
If your tax return is filed by the 31 January deadline, you will be required to keep the records relating to your tax return for at least 22 months after the end of the tax year the tax return is for i.e., until at least 31 January of the following year.
However, if you file your tax return after the filing deadline you need to keep them for fifteen months after the date your tax return is eventually filed with HMRC.
Additionally, if you are in receipt of income from a trade (including Self Employment or Partnership) or from Land & Property (e.g., via letting out a property), records relating to these sources of income must be kept for five years and 10 months after the end of the tax year (for example until at least 31 January 2028 for the 2021/2022 tax year). If the accounting period for Self-Employment or Partnership income is later, the records for this source of income must be kept for six years after the end of the accounting period.
You may need to keep your records for longer if HMRC has started a check into your tax return. In this case you will need to keep your records until HMRC writes and tells you they’ve finished the check.
Further details (including information on the type of records a taxpayer is expected to keep) can be found on the HMRC website:
It is worth noting that records relating to purchase or improvement of a capital asset will need to be retained if the capital gain or loss is to be correctly reported on the Tax Return (and will then be subject to the statutory time limits discussed above). This means that some records may have to be retained for decades.
Currently, there is no statutory specification as to the form in which the documents should be retained. However, there is some useful guidance in HMRC guidance manuals.
HMRC Officers believe that certain documents must be retained in original hard copy. According to HMRC guidance manual, this includes evidence of distributions from a company (e.g., a dividend voucher), payments which have had income tax deducted at source, payments received under the construction industry scheme and any paperwork supporting a claim for foreign tax relief (e.g., tax voucher and overseas Tax Return).
Some information can be retained without keeping the original documents. HMRC guidance suggests that some documents could be photographed and placed on microfiche (or, presumably, the photographs could be stored digitally) and that documents which are generated by computer software (such as invoices) that can be reprinted at any time do not need to be kept in hard copy. It is strongly suggested that if documents are retained on computer in this way, the appropriate system back-up arrangements need to be in place.
This means that information can only be preserved (without retaining the original documents) where an exact copy of the original record can be generated. Therefore, summarising the information from the original document (e.g., on a spreadsheet) does not fulfil the record keeping requirement and could lead to penalties if HMRC has requested the supporting documentation and the taxpayer is unable to provide it. Spreadsheet can, of course, still be used; it is just that these cannot take the place of the original documents when it comes to record keeping requirements.
HMRC may enquire into some returns. Whilst most checks of returns are made using HMRC’s risk-based system, some returns are also selected at random for review. The risk-based factors currently include, but are not limited to, residence, overseas workdays, remittances, valuations used in calculating substantial capital gains, termination payments and travel and subsistence expense claims.
HMRC may open an enquiry at any time and for any reason up to 12 months after you submit your tax return if the return is filed on time (i.e., by the due date). If the return is filed late, or an amendment made after the initial return has been filed, then an enquiry can be opened up to 15 months after the return is filed or amendment made.
Thereafter, additional tax assessments (‘discovery assessments’) can still be raised up to four years if it is found that insufficient tax has been paid as a consequence of something being omitted from the return or properly explained.
If insufficient tax has been paid as a result of carelessness, the time limit is extended to six years, and then can be extended to twenty years in the case of deliberate omission of information or other more serious actions.
If you entered into certain arrangements which are classed as tax avoidance you will, or should have, been issued with an HMRC reference number by the promoter, which should be included in boxes 19 and 20 on page Ai 4 of the Additional information pages of your return.
If there is anything to be added e.g., in respect of transactions undertaken on the advice of other advisers, please advise your Telic contact.
If you have any questions or need further advice in this area, please get in touch and we will be happy to discuss further