If you haven’t managed to file your tax return yet, all is not lost. There are a number of steps you can take to minimise any penalties you may incur.
Emily Coltman FCA, chief accountant to award-winning online software provider FreeAgent, explains what you need to know.
Don’t delay further – file as soon as you can
The longer you leave preparing and filing your tax return, the more arduous a task it will feel, and the more you risk incurring higher penalties.
Late filing attracts an automatic penalty of £100, and this applies whether or not you had any tax to pay or have paid all the tax you owe – it is a fine for filing your tax return late, not for non-payment of tax.
But if you file your tax return more than three months late, you can be charged a daily penalty of £10 – and if you are more than six months late in filing, you can be charged another £300 or 5% of the tax you were due to pay, whichever is the greater.
Don’t risk higher penalties, file as soon as you can. HMRC is much less likely to call in debt collectors, or inspect your records in the future, if you have a £100 penalty and file and pay as soon as you can, rather than if you leave the return unfiled and let the penalties pile up.
If you have a reasonable excuse, tell HMRC
HMRC may accept that in some circumstances you had a reasonable excuse for filing your return late, for example if a close family member died or was taken seriously ill just before the filing deadline, or if your computer failed while you were filing your return.
There are other circumstances however that HMRC will not agree are reasonable excuses. It’s nearly always not a reasonable excuse for late filing that you trusted your accountant to make the filing on time, because the responsibility for filing the return remains with you as the taxpayer.
If you think you have a reasonable excuse for filing your return late, appeal against your late filing penalty once you have filed your tax return – this is another reason for filing your return as soon as you can, to give you a chance to appeal in good time.
Try to avoid filing late next year
Take some steps now to make this the only year that you file late: set aside dedicated time in your diary for next year to pull together your figures and fill in your tax return.
I really recommend filing your tax return before Christmas if you can. It is very tempting to leave your tax return until January, but the longer you put it off, the harder it becomes to sit down and do it, and the more likely you are to file late.
Make use of this Self Assessment checklist to help you identify which documents you’ll need to have to hand in order to fill in your tax return, such as bank interest certificates, and forms P60 from your employer. When you’ve collected them up, set up a tax return file or folder and put this paperwork in there, to save yourself having to hunt for them later on.
If you’ve resolved to make your life easier at tax time from now on, keeping records for your business using a system like FreeAgent can help you track income and costs as you go along, rather than having to pull everything together in one go at the end of the year.
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