Are you tired of tax headaches? Millions miss the Self-Assessment deadline every year, leading to unnecessary stress and penalties. But fear not! This guide will help you understand if you must file and avoid becoming part of that statistic.
WHO NEEDS COMPLETE A SELF-ASSESSMENT TAX RETURN?
- Self-Employment: If you’re self-employed as a sole trader or in a partnership, and your trading profits were more than £1,000 in the last tax year (April 6th to April 5th), you must file a Self-Assessment return.
- Property Rental: If you rent out a property and your gross income from rent is more than £2,500 a year, you need to declare it on a Self-Assessment return. There are some exceptions for property with mortgage interest relief, so be sure to check with HMRC if you’re unsure.
- High Income and Child Benefit: If your individual or your partner’s income is over £60,000 and you claim Child Benefit, you may need to pay back some of it through Self-Assessment.
- Capital Gains Tax: If you sold an asset (like a second property or shares) at a profit and need to pay Capital Gains Tax, you’ll likely need to file a Self-Assessment return.
- Untaxed Income: If you have any untaxed income that isn’t covered by PAYE, you might need to file a return. This could include things like tips and commission, income from savings and investments exceeding £10,000, or foreign income.
WHO CAN RELAX?
- Who earns money from employment that is less than the Annual Allowance (£12,570)
- Property owner whose annual gross income is £1,000 or less from Rental property.
- Small sole trader whose annual gross income is £1,000 or less from the sole trading business.
- If your only income comes from basic savings accounts or investments where tax is already deducted at source (like ISAs), you might not need to file.
WHAT HAPPENS IF YOU FAIL TO SUBMIT A SELF-ASSESSMENT TAX RETURN? Don’t Panic!
If HMRC sends you a self-assessment tax return or notice to file one online, by law, you must do so, even if you haven’t earned any taxable income in that tax year. Alternatively, you can contact HMRC to ask to have the tax return withdrawn.
Failing to submit a Self-Assessment tax return can lead to a series of below-mentioned penalties:
- Fixed Penalty: You’ll be charged an automatic £100 penalty even if you don’t owe any tax, as long as your return is up to 3 months late.
- After 3 Months: A daily penalty of £10 per day, up to a maximum of £900 (i.e. 90 days), for returns submitted between 3 and 6 months late.
- After 6 Months: A penalty of either 5% of the tax owed or £300 (whichever is higher) applies on top of previous penalties.
- After 12 months: You will have to pay another 5% or £300, whatever is higher, in addition to all previous penalties.
If you have a valid excuse for not filing your Self-Assessment tax return before the deadline, you can appeal to HMRC. Try to do this within 30 days of your penalty notice being issued, although, in special circumstances, HMRC will consider later appeals.
HMRC recommends that you pay the penalty even if you appeal because if your appeal is rejected, you’ll have to pay interest on the penalty from the date it was due. If HMRC agrees with your appeal, it will repay you the money you’ve paid, plus interest (providing all of your tax payments are up to date).
Don’t wait until January! Bookmark this post and refer back next tax year to ensure a smooth and penalty-free experience.
Let’s connect with the team at Apex KPO and discuss how outsourcing will benefit your practices or you can email us at info@apexkpo.com.
Do you have any questions?
Speak with the expert team at APEX