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Tax Self Assessment
The UK self-assessment regime for individuals has now been in place for several years.
Self-assessment puts the onus on the taxpayer to complete returns accurately and on time. Tax must be paid on set dates but HM Revenue & Customs (HMRC) can be asked to compute the amount. Penalties may be charged for failing to comply with the requirements of self-assessment.
Self-assessment affects all non-corporate UK taxpayers, including executors, trustees and individuals. It particularly affects those who:
• are sent a tax return each year
• have income which is not taxed at source
• are liable to higher rates of income tax
• are either self-employed or company directors.
The strict deadlines imposed by the system mean that taxpayers should organise their records of income, gains, deductions and reliefs so that tax returns can be prepared on time. Failure to comply with the rules is likely to lead to interest charges or penalties even if mistakes are made innocently.
Under self-assessment taxpayers (who may be assisted by their advisers) are asked to work out the amount of tax payable for each period. The return form itself contains the 'self-assessment' so Officers of Revenue and Customs will not usually need to issue an assessment. However, there is an option to have Officers of Revenue and Customs calculate the tax payable if the return is submitted earlier (see opposite). A statement of account is sent to each taxpayer to show HMRC's record of liabilities and payments.
The deadlines for sending in tax returns are:
• 31 January after the end of the tax year if you want to work out your own tax bill
• 30 September if you ask HMRC to work out the tax
• 30 December if you file the return over the internet (29 December if using the Electronic Lodgement Service) and you want an underpayment (not exceeding £2,000) to be collected via the PAYE system.
The dates for paying income tax are:
31 January within the tax year. This is a first payment on account, usually half the tax due for the previous year
31 July after the end of the tax year. This is the second payment on account and will normally be the same as the first
31 January following the end of the tax year. This is a balancing payment (or refund) and will be based on figures in the tax return that should be sent in by this date.This is also the date by which capital gains tax should be paid.
In practice, two elements of tax will be due on each 31 January being the first payment on account for the current year and the balancing payment (if any) for the previous year.
The penalties for late returns are:
• £100 (automatic) - return up to 6 months late
• £200 (automatic) - return more than 6 months late
• 100% of tax due (max) - return more than 12 months late
• £60 per day (maximum) for continuing delay - if approved by the Commissioners for HMRC.
Apart from interest mentioned above there is a fine for late payment of tax called 'surcharge'. Surcharge is payable on tax underpaid if overdue for more than 28 days, as follows:
• after 28 days - 5% of the tax unpaid
• after 6 months - a further 5% of the tax unpaid.
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This intel was contributed by bradzer
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May, 2012
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