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If you’re one of the more than 10 million people who is required to complete a Self-Assessment tax return*, the HM Revenue and Custom (HMRC) filing deadline of midnight on Tuesday 31st January is looming large, and you’ll either be feeling smug about how organised you are, having got yours in ahead of the due date, or you’ll be beginning to panic as you realise how little time there is left.
If you’ve already filed, well done, but if you haven’t, don’t let the deadline pass by. Paying your tax is a serious responsibility that shouldn’t be taken lightly. According to HMRC, over 890,000 people missed last year’s filing deadline, automatically triggering a fine.
Being up to three months late in submitting your return will attract a £100 fine (even if you owe no tax) – but of course, that’s just the start. The late filing penalty increases after three months, there are further penalties for late payment, and any overdue tax will also be subject to interest.
In short, you can very quickly start to ramp up significant debts with HMRC if you don’t file your return on time.
If you pay your tax through ‘payments on account’, don’t just file your return and wait for a tax bill to arrive from HMRC. You are required to make 2 payments every year – one on 31st January and another on 31st July, each payment representing half your previous year’s tax bill (including Class 4 National Insurance if you’re self-employed). So, 31st January is not only the date your tax return has to be filed by, it’s also the date by which you have to make your first payment.
This is something people often get confused about, but if you let the deadline pass while you wait for a bill to arrive, you’ll miss your payment date and find yourself incurring penalties for late payment as well as interest.
The payments on account system works well if your business trades at a relatively constant level, but if you suddenly experience a dip in revenue, you can get caught out. As mentioned earlier, instalments are based on your last year of trading – now that we’re 10 months into the tax year 2016-17, you’ll have a good idea how it compares to 2015-16, the year you’ve just filed. If it’s significantly lower, you might want to ask HMRC to reduce the payment on account you’re due to make on 31st January.
Many accountants fail to make their clients aware that they have the ability to influence their payments on account, simply letting them pay the bill. But making a request for a reduction is perfectly legitimate – if you’ve just gone through a tough year, the last thing you need is a tax bill that’s disproportionate to your income. You should ideally advise HMRC at the same time you file your return, but it is still possible to make a request after 31st January.
If you find yourself facing a tax bill that you just can’t pay in one lump sum, it is sometimes possible to negotiate staged payments with HMRC, spreading instalments over several months to ease any stress on your cash flow. Having said this, we’d recommend starting to pay what you are able to as soon as possible, NOT waiting to negotiate. Based on our experience of dealing with HMRC on behalf of clients, it’s much easier to reach an amicable arrangement with them if you can demonstrate you’re already making efforts to settle your outstanding tax bill.
Is your accountant just processing your figures – rather than taking an in-depth interest in how your business is performing year on year – and how it impacts on your tax liability? Are you facing a tax bill and worried about how you’re going to pay it?
If you have any concerns relating to tax, or you feel you’re not getting the help and advice you need from your accountant, talk to Inca now. Each year, we help hundreds of companies and individuals file their returns in plenty of time so they have no unexpected surprises.
*Are you uncertain whether you need to complete a tax return? You can check using HMRC’s online tool here.
If you’d like Inca to take all your tax headaches away – liaising with HMRC if you need us to, and leaving you free to focus on running your business, call us now on 01235 868888 or 01865 821100 and let’s have an initial chat in complete confidence.