Below is a summary of the self-assessment rules and the penalties for failing to comply with your obligations.
Under the self-assessment regime, an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.
The tax year
Tax returns are issued shortly after the end of the fiscal year. The fiscal year runs from 6 April to the following 5 April. Tax returns are issued to all those whom HMRC are aware need a return, including all those who are self-employed or company directors. Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due they should notify HMRC who may then issue a return. Under self-assessment, it is your duty to inform HMRC when tax is due.
A taxpayer is usually required to file their tax return electronically by 31 January following the end of the fiscal year. If you file a paper tax return, then it must be filed by 31 October 2020.
Late filing penalties apply for personal tax returns as follows:
- £100 penalty immediately after the due date for filing (even if there is no tax to pay or the tax due has already been paid)
Additional penalties can be charged as follows:
- over three months late – a £10 daily penalty up to a maximum of £900 (though this has been waived for the 2018/19 tax return due to Covid 19)
- over six months late – an additional £300 or 5% of the tax due if higher
- over twelve months late – a further £300 or a further 5% of the tax due if higher. In particularly serious cases there is a penalty of up to 100% of the tax due.
HMRC may correct a self-assessment tax return within nine months of the return being filed in order to correct any obvious errors or mistakes in the return
An individual may, by notice to HMRC, may amend their self-assessment at any time within 12 months of the filing date.
HMRC may enquire into any return by giving written notice. In most cases, the time limit for HMRC is within 12 months following the filing date.
If HMRC does not enquire into a return, it will be final and conclusive unless the taxpayer makes an overpayment relief claim or HMRC makes a discovery.
It should be emphasised that HMRC cannot query any entry on a tax return without starting an enquiry. The primary purpose of an enquiry is to identify any errors on, or omissions from, a tax return which results in an understatement of tax due. Please note, however, that the opening of an enquiry does not mean that a return is incorrect.
If there is an enquiry, if we are acting for you as your agent, we will also receive a letter from HMRC which will detail the information regarded as necessary by them to check the return. If such an eventuality arises, we will contact you to discuss the contents of the letter.
HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.
Records are required of income, expenditure and reliefs claimed. For most types of income, this means keeping the documentation given to the taxpayer by the person making the payment such as your P60. If expenses are claimed, records are required to support the claim.
Checklist of books and records required for HMRC enquiry
Individuals, Employees and Directors
- Details of payments made for business expenses (e.g. receipts, credit card statements)
- Share options awarded or exercised
- Deductions and reliefs
Documents you have signed or which have been provided to you by someone else:
- Interest and dividends
- Tax deduction certificates
- Dividend vouchers
- Gift aid payments
- Personal pension plan certificates.
- Personal financial records which support any claims based on amounts paid, e.g. certificates of interest paid.
- Details of rental income and expenses for properties let during the tax year.
- Details of assets sold during the tax year.
- Invoices, bank and credit card statements and paying-in slips
- Invoices for purchases and other expenses
- Details of personal drawings from cash and bank receipts
- Details of wages paid to employees
- Stock value from a stock take undertaken at the year-end
Remember this is all information we should have had received to complete your accounts and tax return.
Last updated: 17.11.2020
Whilst the information in this document is correct; you should always obtain individual advice from a qualified accountant.