If you’ve been sent a HMRC self-assessment form, or received notification from HMRC since April 2015 that you need to fill one in then yes, you do.
According to the HMRC’s website, you need to file a tax return if:
- you were self-employed – note: you can deduct allowable expenses
- you got £2,500 or more in untaxed income, for example from renting out a property or savings and investments (contact the helpline if it was less than £2,500)
- your savings or investment income was £10,000 or more before tax
- you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
- you were a company director – unless it was for a non-profit organisation (e.g. a charity) and you didn’t get any pay or benefits
- your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
- you had income from abroad that you needed to pay tax on
- you lived abroad and had a UK income
- you got dividends from shares and you’re a higher or additional rate taxpayer (but if you don’t need to send a return for any other reason, contact the helpline instead)
- your income was over £100,000
- you were a trustee of a trust or registered pension scheme
- you had a P800 from HMRC saying you didn’t pay enough tax last year – and you didn’t pay what you owe through your tax code or with a voluntary payment
If your tax is deducted by your employer, you usually don’t need to submit a form unless you get additional income from a second job or freelance work. If HMRC has asked you to complete a self assessment tax return but you don’t think you need to, get in contact ASAP. If you don’t and you simply don’t send one in, you’ll have to pay a penalty.
What if I’m late paying? HMRC self assessment late payment penalties
If you’re late making your payment on account or your tax bill you’ll be charged 5% interest. This is on top of the minimum £100 fine for missing the deadline for filing your tax return. From there, penalties can start to spiral. You can find more details of HMRC’s late payment penalties here or use HMRC’s penalty calculator to estimate any costs to you here.
Appealing HMRC penalties: reasonable excuses for late payment or late filing
You can appeal against HMRC’s fines, if you have a “reasonable excuse”. HMRC recently published a list of some of the worst excuses they have been provided which, it’s hard to believe, actually included: ‘The dog ate my tax return’, as well as, ‘I got the deadline wrong’ and, ‘My husband ran off with my accountant’.
However, examples of a reasonable excuse that HMRC gives include:
- Your partner died shortly before the tax return or payment deadline
- You had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- Service issues with HMRC online services
- A fire prevented you from completing your tax return
- A disability that may have prevented you from filing on time
What if I can’t afford to pay the tax I owe?
If you are unable to pay the tax owing, there are a number of options available that you should consider. Initially, if you feel the amount of tax you are due to pay is incorrect, there are a couple of HMRC related processes to check:
- Check your tax code is correct
- Take advice whether any special circumstances apply
- Appeal HMRC’s decision within 30 days of the due date
If all of the above are excluded as an option then it is time to consider your options in relation to your financial circumstances moving forward.
HMRC time to pay agreements
If the amounts due to HMRC are your only significant liability and you DON’T have a proven track record of not paying HMRC, you may be able to apply for a time to pay arrangement. This can give you a few extra months to make the payments and can encourage HMRC to waive a number of penalties.
If being unable to pay the self assessment on time is only the tip of the iceberg and you have bigger debt problems with more creditors than just HMRC, now is a good time to seek further information in relation to formal insolvency options. For example, for sole traders, a sole trader Individual Voluntary Arrangement might be a suitable option worth considering. If you would like to talk it through with one of our business rescue experts in the first instance, get in touch.
Above all, whatever your situation, keep these key points in mind:
- Be sure to file or submit your self returns on time, whether you are able to pay the balance or not.
- If you can pay, don’t delay in making arrangements for payment.
- If you can’t file, or you can’t pay, engage with HMRC at the earliest possible moment – whether personally or through an intermediary.
As well as the financial outcome HMRC will consider your other actions including compliance and engagement when considering compromise agreements. Therefore, our advice is simple: keep HMRC up to date, ASAP, and it will benefit you in the long term.
Even if you think you might have a query, don’t leave things until the last minute. Recent figures showed that the HMRC contact centre telephone queue time averages around 35 minutes, and the later you leave it, the busier the phone line gets.