January can be a stressful time for many as online self-assessment tax returns need to be filed before the month’s end. Whilst the deadline for submitting this year’s tax return may have passed, it’s still important to keep on top of things and keep track of what you owe.
Whilst most people manage to submit their tax return on time, it was reported by the BBC that nearly 1 million people missed the tax return deadline in 2020.
Many people will be able to gather the information they need to complete their tax return themselves or to send to their accountant well ahead of January. Providing information to your accountant earlier will ensure they can review any missing details or to look at how you might make changes in order to maximise your tax reliefs for the following year.
The penalties can be severe
Fines can be issued for late filing. This is usually £100 for late filing during the first three months after the deadline but may increase to £10 a day after three months, up to a maximum of £900. However, if you’re deliberately avoiding paying or do not have the correct paperwork, you may find yourself on the government’s tax defaulters list.
Penalties on taxes owed can frequently add 50% or more to the original tax bill.
We also reported in a previous blog how HMRC is becoming more aggressive in its measures to recover tax, from both businesses and individuals, and has shown that it is prepared to recover tax outstanding over the last few years with its powers under the Direct Recovery of Debts from 2015. This means HMRC can recover money owed from individuals direct from their bank or building society accounts.
So, what can you do to ensure you are paying the correct amount of tax?
The current tax thresholds
You can make sure you’re paying the correct amount of tax and National Insurance by referring to the current tax threshold levels set by the government and freely available online.
If you’re earning above a certain threshold (currently set at £12,500 for the 2019/2020 tax year but subject to change), then you need to pay income tax. If you’re employed, you needn’t worry too much about it as it will be automatically deducted from your salary but if you’re self-employed or running a business, then you need to make sure you’re paying the correct amount of tax and national insurance.
National Insurance needs to be paid by both employed and self-employed people. It’s deducted from your pay slip if you’re employed.
If you’re self-employed and making an annual profit of £6,365 or more, your accountant (or you) will need to calculate how much you need to pay as part of your self-assessment tax return. For a more detailed explanation of the rates of National Insurance that you need to pay then look at the gov.uk page.
You should also make sure you are keeping business receipts related to the expenses your business incurs so you can account for this when it comes to completing your tax return.
The tax rules can be difficult to navigate but innocent mistakes are still penalised by HMRC so it’s important to have an expert to help you.
How we can help
If you’re struggling with your tax affairs, why not talk to us. Here at Sestini & Co we dedicate considerable time and expertise to keeping up with changing case law and ensuring we know the tax rules.
If you need help with any tax-related issues and would like to speak to us, give us a call on 01761 241 861 or email us today.
We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.