Filing a tax return isn’t something the majority of us will be looking forward to – but it’s one of the most important things you need to complete when it comes to running a business.
It is crucial that you file your tax returns on time, because there are stiff penalties if you miss the deadline. These include fines and further financial penalties that keep increasing on a daily basis the later you leave it.
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Who needs to submit tax returns?
While tax is usually deducted automatically from wages, pensions and savings; people and businesses with other income must report a tax return, known as a self-assessment. The income can be from one or more sources and is relevant to the self-employed or sole traders who earned more than £1,000 before deducting any tax relief. You must also submit a self-assessment if you are a partner in a business partnership.
The law also applies if you have any other untaxed income, including tips and commission from your job; money from renting out a property; income from savings, dividends and investments and any foreign income.
What are the penalties for late tax returns?
The deadline imposed by HMRC for submitting annual tax returns is 31st January. If you miss this deadline, you will be fined £100 – even if you had no tax to pay. If you continue to flout the rules, further penalties of £10 a day will be imposed after three months, up to a maximum of £900.
If you still don’t submit your tax returns to HMRC after six months, in addition to the fines, you will also be charged 5% of the tax you owe, or £300, whichever amount is greater. This will happen again after 12 months of non-compliance.
All partners can be charged the penalty when a partnership tax return is late. If there is a reasonable excuse to explain the delay, you can appeal against a penalty.
How has Covid affected tax returns?
The tax office displayed leniency at the end of January 2021, due to the ongoing Covid-19 pandemic. People who hadn’t filed tax returns by the usual deadline of 31st January were given an extension until 28th February 2021, if the reason for the delay was Covid-related.
This was in recognition of the unprecedented difficult circumstances that people were experiencing due to the pandemic and lockdowns. However, in normal circumstances, the deadline of 31st January is set in stone and there is no leniency.
According to government statistics, 1.7 million taxpayers missed the deadline of 31st January 2021, equating to 14.74% of the returns filed. More than 10.2 million returns were filed online, representing 95.64% of the total filed.
What if you can’t afford to pay your tax?
Anyone who can’t afford to pay their tax bill in full can apply to spread the cost by setting up a payment plan online, via Gov.uk, in up to 12 monthly instalments – as long as certain criteria are met. The debt needs to be between £32 and £30,000 and there should be no outstanding tax returns or other tax debts.
If you’re struggling to keep up to date with the financial aspects of your business, such as tax returns, hiring professional accountants can help you manage your finances, while ensuring you always file your tax return on time.
A family run business, DL Accounts Ltd can manage all your business’ financial responsibilities, such as tax returns. Keeping it affordable, we provide reliable digital accounting solutions. Making Tax Digital, we strive to take all the stress out of your bookkeeping commitments by offering a wide range of services.
Please contact us for further information.