Tax returns explained and the cost of missing the tax return deadline

Advice for small businesses ahead of the self assessment deadline

January is the busiest time for HM Revenue & Customs (HMRC), as many small businesses and individuals file their self-assessment tax returns online ahead of the 31 January deadline.

HMRC received close to 10.4 million completed self-assessment tax returns for 2014/15; 150,000 more than the year before. Of those 10.4 million, 9.24 million were filed online, highlighting the increasing trend for dealing with the tax authority electronically.

The busiest day in 2016 was 29 January, with 513,271 returns completed – more than 21,386 returns received per hour.

Not surprisingly with its resources stretched during January, HMRC’s helplines will only handle ‘simple’ queries such as queries relating to PAYE coding notices or the Marriage Allowance.

HMRC’s online filing system is able to calculate your tax liability for you, but it will not examine whether your figures are accurate or that you have claimed your full entitlement to expenses, reliefs and allowances.

To assist you with the basics of completing a self-assessment tax return, we have compiled a list looking at the most common entries made by employees and the self-employed.

As the current tax year runs from 6 April to 5 April, unless highlighted, make sure that the information you provide covers this period.

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Common tax return items

  • Bank interest – Your tax return should include any interest your bank accounts have accrued – even if it has been taxed at source. Your bank should have sent you a tax certificate in or around May with all the details you need.
  • Employment income – You will need your P60/ P45 – and P11D if applicable. If you don’t have these to hand, your final payslip for the tax year should have the information you need. If you can’t find that either, you should ask your employer for the details.
  • Employment expenses – If you are employed and have travelled business miles or incurred related expenses, you may be able to claim for them if your employer has not reimbursed you.
  • Pension contributions – Your pension provider should have issued you with an annual statement. Avoid using the amounts on your bank statement, as you may need the gross amounts to claim tax relief.
  • Dividends – These must be included even though they are taxed at source. If you have reinvested them, they still need to be included in your tax return. Dividend vouchers should have been sent to you around the time each dividend was paid.
  • Second homes –You may need to disclose your rental income and expenses on your tax return, even if you let the property at a reduced rent or generate a loss. If you let the property out at a reduced rent, expenses will be restricted to the amount of rent received- meaning you can’t create a loss and the surplus expenses are simply forgone; they can’t be carried forward. If you make a loss, contrary to popular opinion, there can be instances when you may still be obliged to complete a return or it may be advisable to. If you’ve sold a second property during the year, you may have to pay capital gains tax and the Stamp Duty Land Tax will be at higher rates than normal.
  • Charitable donations – Any donations you have made to charity under the Gift Aid scheme should be included on your return.
  • Other income – Any ‘cash in hand’ or other taxable income that doesn’t fit into any obvious boxes on your tax return may still need to disclosed – even if there is no paperwork or it has been paid in cash. As of April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own.

The above list is by no means comprehensive, so it is always advisable to have an accountant help you complete your tax return as HMRC will penalise you for any mistakes made in your tax return – whether you were aware of them or not.

Late tax return penalties

Saying that HMRC’s website was busy or not being able to get through to an advisor on the phone won’t be accepted as excuses, so filing your returns late may cost you more than you anticipated.

At present, a late tax return is subject to the following penalty regime:

  • An automatic, initial £100 penalty, which will apply even if there is less than £100 tax to pay or the tax due is paid on time
  • Three months late: Additional daily penalties of £10 per day – up to a maximum of £900
  • Six months late: A further penalty of 5% of the tax due or £300 – whichever is greater
  • 12 months late: Another 5% of the tax due or £300 – whichever is greater
  • In some of the most severe cases, the penalty after 12 months can be up to 100% of the tax due

It’s important to note that these penalties are in addition to one another, so a self-assessment tax return filed a year late could be subject to penalties of at least £1,600 – or even more, depending on the level of tax due to HMRC.

There are also additional penalties for late registration with HMRC and late payment of tax, with the latter also incurring interest.

This is where an expert accountancy service can help take care of all your tax affairs efficiently and accurately: from registration with HMRC and completion of your tax return, to calculating your tax liability and tax due dates.


Jo Nockels FCCA, is Senior Training and Communications Managers at TaxAssist Accountants, the UK’s largest network of accountants catering for more than 65,000 small businesses and individuals.

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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