It’s almost time to handle your taxes, and if you end up waiting till the last minute you could face some severe penalties. Handling UK taxes doesn’t have to be impossible, but since there aren’t a lot of guides on the matter, we figured that we would make one for you. Thank us later! 😉
Now then, let’s get down to the nitty gritty here. The first thing you should know is that a tax return is just a form that you report details of your taxable income, as well as any capital gains. If you don’t own any major investments, you won’t have any capital gains to concern yourself with. You can also claim tax allowances and tax reliefs. This will lower your overall tax liability. HM Revenue and Customers can indeed issue a tax return to you each tax year. The tax year runs from 6 April one year to 5 April the next.
By law, if you receive a tax return, you have to fill it in. HMRC then uses the info on the return to work out your tax bill — or if you are due a tax refund.
There are only a few individuals that get sent a tax return. Generally speaking, if HMRC thinks you are paying the right amount of taxes through the Pay As You Earn (PAYE) system on wages, you aren’t going to get a tax return.
Yet what about if you are self employed? That’s right — you’re getting a tax return. If you have rental or other income from properties, you will get an annual tax return to fill out. Also, if you are a pensioner, you will not have a tax return.
There are deadlines for sending back tax returns. You will want to make sure that you pay attention to this. A paper tax return has to be received by HMRC by 31 October after the tax year has ended. However, an online tax return has to be received by 31 January following the end of the tax year.
There are some shocking penalties for sending in a return late. If you are a day late, it’s a 100 GBP penalty — even if you don’t owe anything more! If you are three months late, there is an automatic penalty of 10 GBP a day up to a max of 900 GBP. This includes the 100 GBP penalty, for a total of 1000 GBP!
If you are six months late, you will owe five per cent of the taxes due or 300 GBP, whichever is greater, along with the other penalties.
If you’re a year late? Another five percent, or 300 GBP. You could end up paying nearly 1600 GBP in penalties without owing any taxes.
Keep in mind that you can indeed appeal, but you will need to demonstrate that you had a good reason to be late on your return.
HMRC will calculate your tax bill as long as you send in your paper return. You have to do it before the filing date of 31 October in order to have everything processed properly.
You may have to use estimated figures because you don’t have all of the information, yet waiting for the information to come in would slow down your return. You also want to make sure that you are following the instructions — you may not need to always note whether an amount is provisional or estimated. It just depends on the situation.
If you’re stuck and you need help, there are tax preparation services that handle this for you from start to finish. Either way, good luck and don’t forget your dates!