Who needs to complete a tax return ?

Were you among the 4,757 individuals who completed their tax return on Christmas Day? Or the 12,136 who did so on Boxing Day? Leaving your tax returns to the last minute is unfortunately a common experience for many taxpayers. In the tax year 2020/21, approximately 290,000 individuals incurred fines for late filing and accrued the automatic £100 late filing penalty.  

And with more than 1 million people being drawn into self-assessment for the first time due, in the main, to rising inflation and the freeze, by the Government, in many annual allowances until 2028, a larger number of taxpayers are finding themselves at risk of getting hit by the late filing penalties.  

Self Assessment Tax Returns 

Self Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax. 

Tax is usually deducted automatically from wages and pensions known as PAYE (Pay As You Earn). People and businesses with other income must report it in a tax return. 

The idea of Self Assessment is that you are responsible for completing a tax return each year if you need to, and for paying any tax due. It is your responsibility to tell HMRC if you think you need to complete a tax return. 

If you complete a Self Assessment tax return, you include all your taxable income, and any capital gains. You should also claim any tax allowances or reliefs that you are entitled to on the tax return. 

You send the form to HMRC either on paper or online. The information on the tax return is used to calculate your tax liability. This process is called Self Assessment. 

What is the deadline for completing a Self Assessment Tax Return? 

31st October 2023 - The deadline for submission of tax returns in paper format for the tax year ending 5th April 2023. 

30th December 2023 - The deadline to submit your online tax return for automatic payment of owed taxes from your pension and wages. 

31st January 2024 - The deadline for online self-assessment tax returns for the 2022/23 tax year to be completed. 

For more information about tax dates and thresholds, check out our up-to-date guide. 

Who needs to complete a tax return? 

According to the gov.uk website, you must send a tax return if, in the previous tax year (6 April to 5 April), any of the following applied: 

• You were self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on) 
• You were a partner in a business partnership 
• You had a total taxable income of more than £100,000 
• You had to pay the High Income Child Benefit Charge
• You had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value 

You may also need to send a tax return if you have any untaxed income, such as: 

• Some COVID-19 grant or support payments 
• Money from renting out a property 
• Tips and commission 
• Income from savings, investments and dividends 
• Foreign income 

What do I need to complete a tax return online? 

For those filing online, having a Government Gateway login and a Unique Taxpayer Reference (UTR) number is required. You can find everything you need to know about creating a login on the gov.uk website. 

What happens if I don’t complete the self-assessment in time? 

If you don’t file your tax return correctly by the deadline, you will be sanctioned with a penalty depending on how late you file your return. This penalty will begin at an initial £100 fixed fee and progress as follows: 

• After 3 months, daily penalties of £10 will start, up to £900 in total. 
• After 6 months, you will be sanctioned for 5% of the total tax due or £300, whichever is greater. 
• After 12 months, you will be sanctioned for a further 5% of the total tax due or £300, whichever is greater - in some cases, you may have to pay 100% of the tax you owe

Additionally, the interest rate that HMRC charges on unpaid tax recently rose to the highest it has been in 14 years. The amount is calculated as the base rate plus 2.5% - so currently this is a rate of 7.75%. This is in contrast to the interest rate paid to those that are owed money by HMRC, they will only apply the base rate minus 1% (4.25%), known as the repayment interest rate.

Late filing isn't the only trigger for penalties. Failure to pay the owed tax on time will result in further penalties. In that 2020/21 tax year, 1.43 million people faced fines for overdue payments, up from 1.24 million the previous year. Interestingly, despite HMRC granting a one-month waiver for late filing and payment penalties that year, due to the challenges posed by the Covid-19 pandemic, the numbers continued to rise. 

However, seeking assistance over the phone might prove challenging. HMRC announced in January 2024 that it would focus on addressing priority calls leading up to the months end, with reported waiting times increasing from 5 minutes in 2017 to 20 minutes in 2022. Many callers have faced prolonged persistence to connect with the right person for assistance, despite generally positive experiences once contact was established. 

That said, HMRC has made it clear that for those that can demonstrate a genuine reason why they cannot make the deadline, they will be ‘lenient’ in their penalty process. The penalties mainly exist to punish deliberate tax evaders and those who persistently fail to complete their tax returns.

There are many ways you can minimise the tax you pay, with some taxes mitigated altogether. For those with higher earnings, check out our free guide on tax planning strategies. Alternatively, give us a call on 0333 323 9065 to book a free non-committal initial consultation with a member of our team to find out how we can help. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate tax advice.