Your tax questions answered - Self Assessment

Does Self Assessment really mean that I have to calculate my own tax? It seems very complicated.

The tax is calculated automatically when you file your return online. However if you file a paper return and you want the tax office to calculate your tax liability in time to pay the correct amount by 31st January, you will need to file your return by 31st October.

After this date, the tax office will still calculate your liability but they may not advise you of the amount to pay in time for the deadline and you will be charged interest on late payments.

What is the deadline for submitting my return?

31st October is the deadline for submitting a paper return.

30th December is the deadline for submitting an online return if you wish any underpayment of tax of less than £2000 to be included in your tax coding.

31st January is the final deadline for submitting your return online.

What happens if I do not fill my return in on time?

You will be fined a £100 late filing penalty. A further £100 penalty is charged six months after the deadline if your return is still not filed. The Revenue can also request daily penalties of up to £60 per day.
The £100 late filing penalty may be reduced if your tax liability for the year is less than £100. However, the daily penalties will remain due irrespective of your final liability.

I will owe a large amount of tax, and cannot get my return in on time. Is there any other way I can avoid the £100 fine?

Yes there is.
If you have a good idea how much you owe, you can pay the amount due before 31 January.
If you pay at least the amount due, you will not have to pay a penalty. As this cannot exceed the amount of tax owed, and as you do not actually owe anything at 31 January, you cannot be fined.
This method is not risk free, as you may owe more than you think, in which case you will be fined.
As always, we recommend that your return is submitted on time.

I owe tax, how will it be collected?

The most common method for the employed or pensioners is to have your tax code adjusted which can be done on amounts up to £2000. It is done by collecting additional tax on your salary or pension each week or month.
If you are going to send in a paper return, it will have to be in before 31 October to do this. If you send it electronically, you have until the 30 December. For self employed or those with large tax liabilities in excess of £2000 the amount is due for payment by 31 Jan following the end of the tax year. Payments on account may also arise for the following tax year.

If I do have to pay tax directly, when do I need to make payments by?

31 January.
This is the final date for making the final payment of tax for the year before. So, if you owe tax for the year to 5 April 2010, you need to make sure that all the tax due has been paid by 31 January 2011.

You may also be required to make payments on account for the following tax year if the amount of income tax you had to pay to HMRC in the previous year was at least £1000 and less than 80% of the total tax liability was collected at source. Two equal payments will be due on 31 January and 31 July with any balance becoming due on the following 31 January.

Do I have to pay my tax bill in a lump sum?
If you owe less than £2,000, the amount may be included as an adjustment to your tax code for a future tax year.
To do this, if you submit a paper return it has to be in before 31st October. However, if you file your return online, it can be done up to 30 December.
You should expect to pay any tax due by 31 January if it is not being collected through your tax code.

What if my return does not need to be submitted until 31 March? Do I still have to make the payment by 31 January?
If your return was issued late and you are required to file later than 31 January then the due date for payment is the same as the filing date for the return.

I have not been sent a return, but should I complete one? My only income is from my job which pays £20000 per year.
If you have not been sent a return and all of your income is taxed at source, you do not have to complete a return.

Does Self Assessment affect everyone?
No, however, self assessment rules state that, even if you have not been sent a return, you have a statutory duty to tell the Revenue of any untaxed income.
If you haven't had a return and have nothing to declare, you are not within Self Assessment.

Although my return was late, it was not my fault. Do I still have to pay the fine?
Not necessarily.
The law recognises that some things are out of our control. If you can prove that there was a "reasonable excuse" for the lateness of the return, you may well get the fine overturned. Unfortunately, there is no definitive guidance on what constitutes "reasonable".
Some excuses will not be successful, such as not having information, your accountant letting you down or not having time because of work.
Some excuses should be accepted though, if genuine. These include not having received the return in the first place, serious illness or bereavement, losing all your financial records through fire flood or theft. You may even cite postal delay, but there must be a provable reason for this in the Post office, such as strike or fire in the sorting office.