I run a small business and I have read that my tax return for the year ended 5 April 2016 is due by 31 October. Is this correct? I thought I had until the end of January next year to submit my tax return.
There are two ways to submit your tax return. You can either send a paper tax return to HMRC or submit your return online. Paper tax returns need to be filed by 31 October and although the filing deadline shares a spot on the calendar with Halloween, it doesn’t have to be a scary time for taxpayers. Online filers have until 31 January 2017 to submit their return.
Failure to file your tax return on time, now leads to automatic penalties being issued by HMRC which go far beyond the initial £100. A few years ago, HMRC amended the late filing penalty regime to make it much more severe and gone are the days where penalties can be mitigated if you have little or no tax outstanding.
There are many advantages of filing your self-assessment tax return ahead of the deadline:
Risk of error is reduced
If you prepare your tax return at the last minute and have to rush it in order to meet the deadline, you are more likely to make a mistake. Therefore, getting your tax return completed well ahead of the deadline should mean your tax return is more accurate. Even a ‘Careless error’ can cost you up to 30% of the tax at stake as HMRC are less forgiving than they used to be.
Preparing your records early will leave time for your accountant to consider if there are any tax planning opportunities available, such as making sure you have utilised all of your tax reliefs and allowances.
Once you have prepared your tax return, your tax liability can be calculated. Your income tax liability for your 2016 tax return is due by 31st January 2017; regardless if you file your return early. So the sooner you prepare your return; the sooner you can start looking at your finances and deciding on what you need to put aside to cover your tax bill.
Avoids penalties and interest
If you are late with your tax return, you will face harsh late filing penalties. And if you are late with your tax payments, you will face interest and possible late payment penalties.
Peace of mind
More than 80% of taxpayers now choose to file their tax returns online which means your return needs filed by 31st January 2017. However, as it clashes with the Christmas festive period, some taxpayers leave their tax returns until the New Year. But why not get it done ahead of the holidays and rest easy over Christmas?
HMRC should write to you annually if they think you need to file a tax return. If your circumstances have changed and you think you no longer need to file a return, you can contact them and if they agree with you, they can remove you from the self-assessment system.
The advice in this column is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.