Each year, around 11.5 million people in the UK need to complete a tax return and submit it to HMRC to report their annual income and gains. However, it is the responsibility of all individuals (whether UK based and not) to ensure that their UK tax affairs are correct and up to date.
Who needs to complete a return?
Specifically, you will need to fill in a UK income tax return if:
- You are self-employed, a business partner, or director of a limited company;
- You are an employee or pensioner with an annual income of £100,000 or more;
- You have a pre-tax investment income of £10,000 or more;
- You have profits from rental properties in excess of £2,500 (or gross rents in excess of £10,000);
- You are a 'name' at the Lloyd's of London insurance market;
- You are a minister of religion;
- You are a trustee or representative of someone who has died.
HMRC has a tool to check whether you should be completing a personal tax return, which can be found at https://www.gov.uk/check-if-you-need-tax-return.
Do I need to complete a tax return if my income is low?
Quite possibly, as this depends on the manner of the income received. If your income is less than the Personal Allowance (£12,500 for the year ended 5 April 2021), then the submission may well be for information purposes only as no tax would be due.
When do I need to complete a tax return?
Most tax returns can be completed online either by using HMRC’s software (a web-based form) or by using third party software (usually provided through an accountant) and in both cases, the deadline is 31 January following the year-end (i.e. the year ended 5 April 2020 needs to be submitted by 31 January 2021).
If an electronic submission is not possible (for example, for MPs or members of the Judiciary) or not desirable, then the deadline for the forms to be received is 31 October following the year-end (i.e. the year ended 5 April 2020 needs to be submitted by 31 October 2020).
Are there penalties for not submitting a tax return?
There is a graduated penalty regime for tax returns that are not submitted on time, which starts at £100 and on continued non-compliance can extend into thousands of pounds. The full schedule of penalties is shown below.
1 day late - £100
> 3 months late - £10 per day for up to 90 days (£900 max)
> 6 months late - The greater of 5% of the tax outstanding or £300
> 12 months late - The greater of 5% of the tax outstanding or £300 unless the taxpayer is held to be deliberately withholding information for HMRC to properly assess the tax
> 12 months late and deliberate withholding of information
Ultimately based on behaviour, but maximums of:
- If deliberately withheld and concealed from HMRC, 100% of tax outstanding (or £300)
- If deliberately withheld but not concealed from HMRC, 70% of the tax outstanding (or £300)
Reductions to the above are available for giving information and helping HMRC with any enquiries.
There is also a robust appeal process for late submissions due to ‘reasonable excuse for the failure’ although what actually qualifies as a ‘reasonable excuse’ is a topic for great debate and is constantly being tested through the courts.
What do I do if I no longer need to complete a tax return?
HMRC will continue to send you tax returns until your submission shows that a return would not be due at which point they should adjust their record but if you find that the reason you are required to submit a return has ceased (e.g. you sold your rental property last year) then you can call HMRC and they will go through a list of questions and could cancel your return there and then.Sign up in minutes
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About the author
Ian Dodge is the Private Client Services Tax Manager at Haines Watts Berkhamsted.
Ian has joined the firm bringing over 20 years’ experience in Private Client Services (having previously worked with Smith & Williamson, PKF and BDO) and his role encompasses direct tax aspects of circumstances and transactions ranging from private tax and estate planning to property taxes and the restructuring of businesses. Ian is sensitive to his clients’ needs and is able to discuss personal, family and business tax and financial issues in a friendly and coherent manner. His work covers principally UK tax matters but includes extensive experience of residence and domicile issues and related planning.
You can contact Ian via email at IDodge@hwca.com or you can phone him directly on 01442 285 403.