Missed the tax return deadline?
January 31st has just passed, which means that Self Assessment season is over for another year. And if you were one of the millions of small business owners who successfully file their tax return on time, you’re probably breathing a big sigh of relief.
However, HMRC estimates that there are still hundreds of thousands who have yet to complete their Self Assessment. And if you’re one of them, you may now be getting worried about what’s going to happen to you and what action you should take next.
So how can you still get your tax return completed even after the deadline, and what steps can you take to avoid further penalties?
The first thing to remember is that filing your tax return a couple of days late will earn you nothing worse than a £100 fine (although HMRC will also charge you interest if you have failed to pay your tax on time too). You won’t be arrested, or automatically face a visit from a tax inspector, just because you’ve missed the deadline!
But don’t get lulled into a false sense of security. Remember that the longer you take to submit your Self Assessment tax return after the January 31st deadline, the more fines you will incur - so that initial £100 penalty may start getting larger! HMRC may also start to charge additional penalties the longer you wait to pay your tax too, so the quicker you submit your tax return and pay your tax bill, the better.
Have you got a reasonable excuse?
There may be a very good reason why you haven’t filed your tax return on time, such as a serious illness, or a death in your immediate family.
HMRC call this a 'reasonable excuse' for filing late, and you should tell them what has happened as soon as possible. Don’t wait until they send you a penalty notice. Fill in and submit a claim form to let them know.
Examples of other reasonable excuses would include:
- a computer breakdown as you tried to file
- a system failure on HMRC’s part
- your records being destroyed in a fire or flood so near to the deadline that you couldn’t recreate them
- receiving your online activation code late despite having applied for it in plenty of time
If you relied on your accountant to complete your Self Assessment, but they failed to prepare and submit your tax return on time, you may think this is a reasonable excuse for missing the deadline. Unfortunately this is not the case, as HMRC still hold you responsible for your own tax affairs even if you have engaged an accountant. You also won’t avoid a fine because your dog ate your tax return or because you’ve been “travelling the world trying to escape from a foreign intelligence agency” - both of which are actual excuses that people have submitted to HMRC for not filing their tax return on time.
File and pay as soon as you can to avoid extra costs and scrutiny
The longer you leave it to file your tax return and pay your tax, the more the interest and penalties will go up. But taxpayers who persistently file and pay late are also more likely to attract unwelcome attention from HMRC inspectors, as they may suspect your records are not up to scratch. If that turns out to be the case, HMRC can also levy penalties for this, on top of the ones imposed for filing and paying your tax late.
Remember, if you’re a sole trader or director of a Limited Company, you can still complete and file your Self Assessment tax return directly from within FreeAgent even after the deadline has passed. Alternatively you can also still use HMRC’s own website or specialist software such as TaxCalc to fill in your tax return.
Put systems in place for next year
Make sure you don’t face the same problems next year - start collecting your tax return paperwork as soon as you can after 5th April 2016. Buy a box file and use it to keep important documents for each tax year, such as interest certificates from your bank, dividend vouchers showing money received on shares, and so forth.
Make sure you’re also keeping on top of your day-to-day business accounts and your expenses too - as this will help save you time and hassle when it comes to filling your Self Assessment tax return next year. At FreeAgent we believe that an hour a week of bookkeeping is all you need to keep your records up to date and accurate, so why not try using this method for your business?
This blog post was first published on 5 February 2014 and was last updated on 17 November 2015.
- Turning over a new leaf: tips for organising your bookkeeping in autumn
- MTD for Income Tax: next steps for sole traders
- Hack to the future: how hack days inspire creativity at FreeAgent
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda