Just Tax tax guides - self assessment



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Tax Guide - Self Assessment

Many people incur penalties for failing to submit their Self Assessment Tax Return on time.

The SA Tax Return is a comprehensive form, with a number of accompanying schedules - but you need only complete those schedules relevant to your circumstances.

For the year ended 5th April 2007 you (or your adviser) must submit your Self Assessment Tax Return including the calculation of your tax liability by 31 January 2008.

If you prefer, H M Revenue & Customs (HMRC) will work out your tax liability for you – but you only have until 30 September 2007 to supply all the necessary information and your completed 2007 Tax Return.

For the year ended 5th April 2008 and later years the Government have proposed two separate filing dates. Paper returns must be filed by the 31st October (tax return for 2007/08 will be filed by 31st October 2008). Returns filed online must still be filed by 31st January (returns for 2007/08 being filed, online, by the 31st January 2009). For those filing paper returns who want HMRC to calculate their tax liability the filing deadline moves back to 31st October for 2007/08 and later years' tax returns.

There are automatic fixed penalties for failing to submit a Tax Return on time
There are variable penalties for incorrect Tax Returns
There are interest charges (and surcharges) for tax paid late

If you're an Employee:

The PAYE system itself was more or less unaffected by the introduction of Self Assessment but you are subject to Self Assessment rules if you need to complete a Tax Return.

If you want an underpayment of tax to be collected via an adjustment to your PAYE code rather than by direct payment on 31 January and you are filing a paper return you must submit your 2007 Tax Return by 30 September 2007. In other cases the deadline is 30 December 2007.

Remember, it's up to you to tell HMRC about anything that may have a bearing on your tax affairs - you cannot use the fact that you were not sent a Tax Return as an excuse. If necessary, you must ask for one.

If your tax affairs are not up to date, you should consider a complete review. Many people on PAYE never complete a Tax Return and never check their codings. As a result, some are paying too much tax. Others are paying too little and are building up a tax problem for the future.

If you have Retired:

The deduction of tax at source from most pensions and investments is unaffected by Self Assessment.

You should, however, check to make sure that the right amount of tax is being deducted from your pension(s) etc as HMRC will not necessarily do this for you.

There are still millions of pounds of unclaimed tax refunds being held by HMRC, a large proportion of which relates to retired people.

If you're an Employer:

You need to check the requirements to provide information to HMRC, your employees and your former employees (see our Quick Guide to PAYE Deadlines for Employers).

You must also ensure that you are keeping adequate and appropriate records.

If you're Self Employed:

Payments on account of tax liability are due on 31 January and 31 July, with a balancing payment (or refund) to be made on the following 31 January. It is worth remembering that any balancing payment must be made at the same time as the first interim payment for the following year, and that interim payments can be reduced where circumstances have changed.

Self Assessment has also led to more emphasis being placed on the ability to justify the figures included in the business accounts section of the SA Tax Return. You can face a fine of up to £3,000 if your accounting records are considered to be 'inadequate' (see our Quick Guide to Record Keeping).

If you're a Subcontractor:

If you're a subcontractor in the construction industry you should be aware the new Construction Industry Scheme was introduced in April 2007. Further information about the new scheme is available from the H M Revenue & Customs website at www.hmrc.gov.uk/new-cis/index.htm

Avoid trouble with Self Assessment. This means:

No outstanding Tax Returns
No outstanding business accounts
Maintaining adequate records
Paying all taxes on time
Completing Tax Returns early will give adequate time to provide for any tax that may be due

Please note: This guide is intended to provide basic information only. Where specific advice is required, we recommend that you seek proper professional help; either from this firm or other suitably qualified person or practice.