Her Majesty's Revenue & Customs (HMRC) have a vital purpose in collecting the money which pays for the UK's public services.
One of their three strategic objectives is to collect revenues due and bear down on avoidance and evasion and, in doing so, they help the honest majority to get their tax right while making it difficult for the dishonest minority to cheat on their taxes.
HMRC will require you to file a tax return if you are self-employed, are a company director, or in a business partnership.
In addition, if you fall into one of these income categories, you are also required to file a tax return:
- a yearly income of £100,000 or more (which puts you into the higher rate tax bracket)
- £10,000 or more of investment income
- income from outside the UK
- income from rented properties
- income from Capital Gains which exceeds the set allowance
It is the responsibility of each of the UK's estimated 12 million strong self-employed workforces to calculate their own tax liability by completing a Self-Assessment Tax Return and ensuring it reaches HMRC by the required deadline.
Detailed information can be found on the gov.uk website here
On the face of it, that sounds relatively straightforward.
Just check which deadline applies to you, fill in the form provided by HMRC with the appropriate information, pop it in the post or file it online, and that's it – the job is done.
Real-life, of course, isn't that simple. Many self-employed people struggle with the amount and complexity of financial information which is required to complete their tax return. It does mean ensuring you have all the information to hand including records of all income received, any tax already deducted, and possibly details of any dividends or pension payments and calculations of any capital gains.
This leads many to put the whole thing off until the very last minute when they are right up against the deadline, and frequently missing it altogether.
We understand the pressures on self-employed people and appreciate that working through the Self-Assessment requirements can be tricky. For more information on how we can ease the process for you, please visit our self-assessment page.
Deadline dates for you Self-assessment Tax Return diary
HMRC have set specific deadlines for tax returns relating to the 2022/2023 financial year. To simplify the various significant dates, we have set out an at-a-glance guide below, so you know when you need to take action.
It should be noted that in April 2019 the Government announced its intention to begin a switchover to digital tax accounting.
The initiative is entitled 'Making Tax Digital', and was due to take effect from April 2020, but because they recognise the difficulties caused by the Covid-19 pandemic, the Government has extended this period.
Monday, April 6th 2022
This is the first day of the new tax year. Your self-assessment accounts for 2022/2023 should be calculated from April 6th 2022 to April 5th 2023.
Sunday, May 31st 2022
It is possible to be self-employed and have paid employment at the same time. Many self-employed people who run their own business on a part-time basis also work part-time for an employer. This day is the last date when employers or pension providers are required to supply a Form P60 summarising pay and deductions for the 2022/2023 tax year.
It would help if you had all your P60s before you submit your self-assessment tax return.
Monday, October 5th 2022
If you became self-employed or began to receive income from property rental during the tax year April 6th 2022 to April 5th 2023, this is the deadline to register with HMRC. If it is the case that you have never had to submit a self-assessment tax return in the past, you need to register by this date, when you will be issued with a Unique Taxpayer Reference (UTR for short) and an activation code, both of which are needed for you to file your first self-assessment return.
Saturday, October 31st 2022 (midnight) Paper Returns
This is the deadline for filing your completed paper self-assessment tax return. If for some reason you miss this deadline for filing your paper tax return, don't be panicked into trying to file it late. Remember, you will still have time to use all the information on the paper return to complete an online tax return, which isn't due until January 31st. Also, make a note to yourself not to submit both versions!
Wednesday, December 30th 2022
If you decide you will be filing your tax return online, and you have also opted to have earnings taxed via PAYE, you can choose to have any overdue tax taken throughout the following year via your tax code. To be eligible for this course of action, you must owe less than £3000, and you need to file your online tax return by this date.
Sunday, January 31st 2023 (midnight)
If you decided to give yourself extra time and submit your self-assessment tax return online, it must be filed with HMRC by 11.59 pm on this date.
Late filing means having to pay the penalty
Unfortunately, every one of those almost one million late filers this year may have been hit with a fine of £100, which gives HM Treasury a huge £100m windfall. The supreme irony is that there will have been many people (a whopping 250,000 in 2018) who didn't owe any tax, but because they missed the deadline for filing their return, even by just being a day late, they would have received a fine.
Anyone who is tempted to leave everything until the last minute and risk missing the HMRC deadline should learn a salutary lesson from these statistics.
The £100 penalty applies to anyone filing their return one day late, but if you persist in not filing your return, the fines start to mount up and can become quite eye-watering. If you are more than one day late, as the days go on you will be fined £10 for every late day up to £900 maximum.
If you are up to three months late, you will be penalised by a fine of up to £1000. If you have still not filed your return after six months, you will receive another fine, on top of those already mentioned, of either 5% of the amount of tax you owe, or £300, (whichever is the higher amount).
After twelve months have elapsed, you will be fined yet another £300 or 5% of what you owe (again, whichever is the highest amount) in addition to all the penalties above.
You should also be aware that once you have made the mistake of missing your tax return deadline, you then have a 'record' with HMRC and they will be keeping a close eye on you in the future. If you are consistently late in filing your return over two years, and then late again the following year, the penalties for the third year will rocket up to £500 per return.
If you have incurred a late filing penalty, you may be able to appeal this with HMRC, particularly if you have what could be regarded as a reasonable excuse; this could be if you have a critical illness, or it could also be the death of a close family member.
HMRC do genuinely want to help people with a valid reason for late filing, but they are forced to reject many of the more 'creative' excuses they receive each year. These have included a man whose wife had been seeing aliens, someone who said they were too short to reach the slot in the post box, someone else whose boiler had broken and their fingers were too cold to type, and a lady who said she was too busy because her first maid had left, her second maid had stolen from her, and her third maid was a slow learner!
In all the hurly-burly of running your own business it is just too easy to put off the task of completing and submitting your self-assessment tax return, but thinking about the consequences of having to pay all those fines on top of your day to day business expenses should make you think twice.
Our team of professional accountants can do all the calculating and filing relating to your tax return, and also liaise with HMRC on your behalf in the case of any dispute. Full details of our services for Sole Traders can be found here