Andrew Baker - Taxation Consultant

UK tax advice for residents worldwide – including Non-Resident Landlords, Pilots, Aircrew, Seafarers, Yacht Crew and Non-Doms
Telephone: +44 (0)1243 582926       Mobile: +44 (0)7795671536       Email: baktax@aol.com 

Self-Assessment Tax Returns

Self-Assessment Tax Returns

If you have income which has not been taxed or you are liable for higher rate tax or you have been sent a self-assessment tax return by HM Revenue and Customs (HMRC) even though you have no income to declare, you have a legal obligation to complete and submit a tax return as well as paying any tax liability due by certain deadlines. Failure to do so could result in penalties, interest and surcharges becoming payable in addition to the tax liability.

The deadline for submitting a paper tax return is 31st October, following the end of the tax year, 5th April. If submitted electronically, the deadline is extended to 31st January following the end of the tax year. Interestingly, HMRC's online software does not support the filing of the non-resident supplementary pages, resulting in either having to file a paper tax return or using commercial software.

If the deadlines are missed, a penalty of £100 will apply, with a further penalty of £10 per day all the while the return is outstanding over the next three months. After 6 months, a further £300 penalty or 5% of the tax if greater, will be charged and the same again will be applied if the return is still outstanding after 12 months.

The tax liability also becomes payable in full by the 31st January. Although, where the tax payable exceeds £1000, you may also be required to make provisional payments on account for the following tax year of the same amount, divided into two instalments payable by 31st January of that tax year and the following 31st July. Any balancing payment due, once the tax return has been completed and the final tax liability calculated, after taking into consideration the payments on account, becomes payable by the following 31st January.

Late payment of the tax liabilities will result in interest charges running on a daily basis currently at a rate of 3%. Surcharges of 5% each will also apply where the tax remains unpaid after 30 days, 6 months and 12 months.

Making Tax Digital & Personal Tax Accounts

The Government announced in the Spring 2015 Budget that self assessment tax returns are to be abolished with the introduction of "Making Tax Digital". In its place, each individual has been given a digital Personal Tax Account with the expectation of the self employed and landlords, whose gross turnover/rents is £10000 or more per annum, to keep their records digitally (it has been confirmed compatible integrated spreadsheets are acceptable) and upload their income and expenditure to HMRC on a quarterly basis. For jointly owned rental property, the £10000 threshold relates to the "letting business" not each individual landlord.

Resulting from an initial announcement of a 12 month delay, the intention was for those under the VAT threshold (currently £85000 for 2017/18) to have a start date of 6th April 2019 and for those over this threshold having a start date from 6th April 2018. However, another announcement by the Treasury on 13th July 2017 has now delayed this further for all businesses and landlords in respect of income tax and national insurance until at least 6th April 2020. Testing has already started on a voluntary basis from the 2017/18 tax year. The one exception to all this, is that businesses who are registered for VAT and have a turnover above the VAT threshold will be required to make quarterly VAT returns only and keep records digitally using MTD compatible software from 1st April 2019.

HMRC have indicted free software and apps will be available for those under the VAT threshold and who do not employee anybody and use the “cash basis” of reporting income and expenditure (ie income received less expenditure incurred in the tax year, rather than income and expenditure relating to the period concerned, which was the statutory basis up to 5th April 2017). However, commercial software may be more appropriate if this is to link with accountant’s/tax adviser’s third party software.

For landlords, the “cash basis” will become the default position to calculate the profit/loss, provided the gross rental income in the tax year is less than £150000. This came into force from 6th April 2017.

HMRC have already set up Personal Tax Accounts for each UK taxpayer and to access yours it is necessary to first of all go through a verification process online. You will need to have a passport or photographic driving licence, debit or credit card and a smart phone or email account. 

For landlords, the first quarterly report will therefore not be required until at least the quarter ending 5th July 2020. Reporting has to be made within 30 days of the end of the quarter, otherwise penalty points will accrue leading up to a potential fine, although HMRC have indicated this will not apply for the first year until the new system has “bedded in”.

Some income, such as earnings, pensions and bank/building society interest which HMRC are automatically advised of, will already be pre-populated in the Personal Tax Account. In time, letting agents will also be required to report rental income and expenditure quarterly for all their landlords. 

However, it is likely that some fine tuning at the end of each tax year will be required eg for landlords, ensuring the mortgage interest is correctly claimed under the new arrangements which start with effect from 6th April 2017 or declaration of other income eg dividends etc. Therefore, a final (6th) declaration (ie after the 4 quarterly returns and annual reconciliation) will also be required by the familiar 31st January deadline or 10 months after the end of the tax year, whichever is the sooner.

If the completion of your tax return is a daunting prospect, with deadlines looming and not wanting to pay any more tax than is absolutely necessary, why not use my tax return preparation service. I will provide you with a checklist to assist you in collating the relevant information and supporting documentation required to complete the tax return, letting accounts, capital gains tax computations etc, and calculate your tax liabilities, as appropriate, advising you when payments should be made. Please contact me for a fixed fee quote.
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