Individuals who have not yet filed their 2016/17 self-assessment tax returns need to do so by 31 January or face an automatic penalty of £100.
Stefanie Tremain, personal tax manager at Blick Rothenberg, said, 'Individuals who miss the 31 January deadline and are up to three months late will incur an automatic £100 penalty. Completing and filing your self-assessment form may seem a hell of a lot of work but it needs to be done.
'After three months, HM Revenue & Customs ("HMRC") will start charging penalties of £10 per day and after six months the penalty will be 5% of the person’s tax or £300 – whichever is higher.”
She added, 'Within six months, it could rack up to at least £1,300. The penalties start to become even more serious if your tax return is more than 12 months late and can be as much as 200% of the tax. These penalties will be charged even if the person doesn’t actually have any tax to pay.'
Jessica McLellan, tax risk & disputes director at the firm, added,'Given how HMRC risk-assess tax returns, if a person’s figures have significantly changed in any area from previous years, they may want to consider including a white space disclosure to briefly explain the change. For example, if their annual investment income has fallen considerably due to funds being tied up long term. If selected as a return to look more closely at, HMRC can then view these changes within a context rather than opening an enquiry to ask why.'
Here are some tips that should make the process of filing the self-assessment form easier:
- Don't forget to declare child benefit payments if your income is over £50,000.
- If you are renting out a property, claim all revenue expenses associated with the letting including letting agent fees, mortgage interest, ground rent, replacement of furniture and appliances but not capital expenditure such as improvements to the property.
- If you are letting out a room in your own home is it more tax efficient for you to claim the annual £7,500 (£3,750 for properties owned jointly) Rent a Room scheme allowance?
- Do you need to claim higher rate tax relief in respect of your pension premiums? Where your pension contributions are paid net of basic rate tax, remember that HMRC ask for the gross figure of your pension premiums not the amount you pay.
- Should your pension annual allowance be restricted if your income exceeds £150,000?
- Include all the Gift Aid donations you have made during the tax year to claim any higher rate tax relief. You can also include Gift Aid donations you have made after the end of the tax year but before you file your return and carry these back. (Remember, you can’t claim for relief for these donations again next year so keep a record of what you have carried back).
- Where you have a P11D form from your employer, include all the figures on your tax return (boxes 9 to 16 of the employment pages) and ensure you include a corresponding claim for relief in respect of any business expenses on the P11D (boxes 17-20 of the employment pages).
- If you use your car for business trips and your employer pays you less than the HMRC maximum-approved mileage rate (45p for the first 10,000 miles and 25p per mile above this) you can claim the excess.
- If you are a member of a professional body required for your employment, you can include the cost of the subscription as an allowable deduction.
- If you made capital gains of less than £11,100 in the year you only need to include these on the return if your total proceeds exceeded £44,400.
- If you have disposed of a UK residential property, report the disposal correctly to ensure the correct rate of tax is charged (i.e. up to 28% rather than 20% for gains on most other assets).
- Do you have any capital losses from earlier years to carry forward and use? You need to “claim” these capital losses. Many people assume that if only losses are realised they don’t need to be reported on the return, but this is not the case and capital losses must be claimed within four years to remain available.
- If you received foreign dividends of up to £300 in total you can include these in the main return effectively as UK dividends and do not need to include supplementary foreign pages.
- Don’t forget to include your state pension figures – although the state pension is paid gross, it is still taxable and needs to be included on your tax return.
- Don’t forget National Insurance – Class 4 can be the forgotten element of tax bills for self employed individuals. Also, individuals with two employments earning over approx. £42k may overpay Class 1 and HMRC can overlook notifying you of NIC overpayments.
- If you are in PAYE and your tax liability is below £3,000 for the year, would you prefer to have the tax collected by way of a restriction to your code for 2017/18 rather than pay in one lump sum by 31 January 2018? If so you should try to submit your tax return by 30 December 2017.
- If you are due a repayment, make sure you claim a refund and include details of the UK bank account you want the refund to be paid into as refunds are made more quickly this way, rather than by asking for a cheque.
For more information please contact Stefanie Tremain
or Jessica McLellan