The annual rush to get your tax return in on time is one of the least enjoyable parts of any self-employed person’s year. But what happens if you miss the online self-assessment deadline?
You may find yourself with boxes of receipts strewn around the room, digging up bank statements, yet when you are finished, all you have to show for it is a race to meet the deadline and a whopping great tax bill.
The number of self assessment taxpayers completing their returns late has been significantly reduced since the advent of online filing, however a relatively large number of individuals still miss the January 31 deadline. Last year around a million people filed late. This results in financial penalties, and can mean that your tax payments are set back.
What happens if you miss the deadline?
To begin with, you should note that there are two annual self assessment deadlines. The first of these, on October 31, is for those filing their returns on paper. If you filed by post, or you have already filed online, you do not need to provide HMRC with any further documents by January 31. However, it is important to remember that you will still have to pay any outstanding tax by this date.
If you have not yet filed your return, and you miss the January 31 deadline for doing so, you will be liable for an automatic £100 fine. All online returns must be completed by midnight, and HMRC has made clear that this deadline will be strictly enforced. If you file just a few minutes late you will be liable for the fine – despite the fact that this year the deadline falls on a Sunday.
If you miss the deadline, you may receive a request for payment from HMRC. In some cases the taxman will estimate the amount of tax you owe, called a ‘determination’, and will then issue a bill based on this estimate. The bill can only be altered if you send in your tax return.
January 31 is not just the online filing deadline – it is also the deadline for various tax payments. If you fail to make a relevant payment you will be liable for further penalties. You will be required to make at least one of two kinds of payment:
- A ‘balancing payment’ to clear any balance owed for the 2008-09 tax year.
- A ‘payment on account’ against the following year’s tax. Payments on account mean that your 2009-10 tax bill is split up. Not everyone is required to make this type of payment.
If you have not cleared your 2008-09 balance by January 31, interest will start to accrue on the amount owed. Again, you should remember that the deadline falls on a Sunday, and factor this into your plans.
Aside from the fact that you will be £100 lighter, missing the deadline can have a detrimental effect on your financial planning.
To begin with, you will be behind on your payments for the 2008-09 tax year. Continual failure to file your return will mean that HMRC estimates your tax for you. This can result in a significantly larger bill.
But there will be knock-on effects for next year’s tax payments. Many self employed people have suggested that it is unfair for them to be expected to pay their entire annual tax bill in one go. In response to this, HMRC set up a direct debit ‘contribution’ system, whereby self assessment taxpayers can make regular payments throughout the year to offset some of their next bill.
Crucially, though, this service is only available to those who are up to date with their previous payments. So – miss the deadline and you will not be able to make contributions to your 2009-10 bill.
Ideally you should ensure you file your return, and pay your tax, on time. However, if you find that you have missed the deadline, do not try to ignore it. You still need to complete your return, even if it is late. Make sure you do this as quickly as possible in order to minimise the repercussions.