Anyone whose circumstances have changed, resulting in a need to register for Self-Assessment (SA) and complete a Tax Return, had until Saturday of 5th October to inform HMRC and those who didn’t risk being heavily fined.
To make matters worse, HMRC have cast their net much wider this year and potentially hundreds of thousands of individuals, who prior to 5th April 2013 were not obliged to complete a Tax Return, are now required to do so.
The biggest group likely to be affected is those individuals or couples who earn more than £50,000 and who have claimed child benefit since 7 January 2013. According to HMRC figures, as at Friday 4th October, approximately 220,000 people had done nothing and most are expected to have missed the deadline on Saturday.
The problem is that in the majority of cases, the individuals will not be aware of the need to register for SA. This is because often the person who doesn’t receive the income is the one that pays the tax, therefore thousands of people will be totally oblivious that it’s going to have an impact on them.
Even if you are late, it is extremely important that individuals tell HMRC right away. The first penalty is £100, but when you add penalties for not declaring the income and tax on that, it will quickly escalate to hundreds and possibly, thousands of pounds. The maximum penalty is the net amount of tax due on 31st January following the tax year for which the return is not filed.
Unfortunately, missing the 5th October deadline for registering will have potentially dire consequences ; for example, an individual starts receiving rental income of say £10,000pa and £4,000 is tax due, but unpaid as HMRC have not been notified, will face a penalty of £4,000.
HMRC’s wider net will also catch Taxpayers:
- Who have changed their employment status in the tax year, such as those who have joined the ranks of the self-employed or become Company Directors
- Anyone whose annual income has exceeded £100,000
- Individuals who have income from savings or investments, where additional tax should be paid because they’re 40% taxpayers and is not already being collected through their PAYE code
- Any PAYE employees and who need to claim expenses associated to their employment in excess of £2,500
- Anyone claiming certain reliefs, such as the Enterprise Investment Scheme (EIS)
- Individuals who have begun receiving income from a rented property in the last tax year
- Anyone who has Capital Gains Tax (CGT) to pay, for example have sold an asset such as a second home
In a Blog last year I forecast that potentially, 500,000 more individuals would be required to complete a SA tax return for the year ending April 5th 2013. It would appear that my forecast was right on the money, but what I didn’t know was HMRC’s decision to ramp up the fines.Share Tweet