October 1, 2023 NB Accounting Services Limited

If you’ve recently embarked on the journey of running your own business, congratulations! While it’s undoubtedly an exciting venture, it comes with certain responsibilities, one of which is filing your tax return. In this article, we’ll delve into your responsibilities under self-assessment, the crucial filing deadlines for tax returns, and the implications of submitting a late or incorrect return.

Notify HMRC of Your Chargeability

First and foremost, as a business owner, you have an obligation to notify Her Majesty’s Revenue and Customs (HMRC) that you are liable for income tax. To avoid potential penalties, make sure to notify HMRC by October 5th following the end of the tax year. For instance, if you’re looking at the tax year 2022/23, the notification deadline is October 5, 2023.

Penalties for Late Notification

If you fail to notify HMRC by the specified deadline, you may become liable for a penalty. The penalty amount depends on the circumstances leading to the late notification and is calculated as a percentage of the unpaid income tax (including Class 4 National Insurance contributions) as of January 31st following the tax year. The exact penalty varies based on the level of disclosure to HMRC.

  • Deliberate and Concealed Failure: 30% to 100% of the unpaid amount
  • Deliberate but Not Concealed Failure: 20% to 70%
  • Any Other Case: 0% to 30%

Filing Your Tax Return

Once you’ve notified HMRC of your chargeability, they will send you a notice to file a tax return for the relevant tax year, such as 2022/23. The deadline for returning the completed tax form depends on whether you choose to submit a paper return or an online return.

Online Return

For those opting for an online return, you must submit it by January 31st following the end of the tax year. However, this deadline could be extended if HMRC delays issuing the notice to file a return. In such cases, the deadline becomes three months from the notice issue date. With an online return, HMRC will automatically calculate your tax liability.

Paper Return

If you prefer a paper return, you should submit it by the 31st of October 2023. As with online returns, the deadline may be extended if HMRC delays the notice to file a return, in which case you have three months from the notice issue date. If you don’t want to calculate your tax liability yourself, HMRC will take care of it for you.

Late Returns

Submitting your tax return after the deadline incurs penalties:

  • Automatic Fixed Penalty: £100 for late filing
  • Daily Penalties for being at least 3 Months late: £10 per day, up to a maximum of 90 days
  • Submission More Than Six Months Late: An additional penalty of 5% of the tax liability or £300 if greater
  • Submission More Than 12 Months Late: The above penalty is repeated.

If you deliberately withhold but do not conceal information that could help HMRC assess the tax liability, the maximum penalty increases to 70% of the tax liability (or £300 if greater). In cases where the withholding of information is deliberate and concealed, the maximum penalty is 100% of the tax liability (or £300 if greater).

Incorrect Returns

If your tax return is found to be incorrect, a penalty may be imposed, depending on the circumstances and level of disclosure:

  • No Penalty: If you’ve taken reasonable care in preparing the return
  • 0% to 30% Penalty: If you fail to take reasonable care
  • 20% to 70% Penalty: Deliberate error but not concealed
  • 30% to 100% Penalty: Deliberate and concealed error

In conclusion, understanding your responsibilities under self-assessment and meeting the filing deadlines is vital for smooth tax compliance. Always strive for accuracy and timely submissions to avoid unnecessary penalties. Remember that professional assistance from an accountant or tax expert can be invaluable in navigating the intricacies of tax returns and ensuring compliance with the HMRC guidelines.