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self-assessment tax return basics

Self-assessment tax returns in the UK

Self-assessment tax returns are submitted yearly and cover your personal earnings or the earnings of a partnership. The due dates for these tax returns and the penalties are the same whether you are an individual, self-employed or in a partnership. If you need to file a self-assessment tax return, HMRC requires you to detail your income, profits from capital gains and any allowances or relief you wish to claim.

Most people will never need to file a self-assessment tax return. They are employed by someone else, they have a simple income structure, they are earning under the threshold requiring a personal tax return and they are paying their tax as they earn.

However, if you are self-employed (on your own or in a partnership), a company director, a trustee or receiving foreign income, you will always need to file a self-assessment tax return. You may also need to do it as an individual if you have earnings over a certain amount or if you have a complex income structure involving benefits, income from property, pensions, dividends from shares, overseas investments, etc.

If you are in a partnership, you and your partners must each file a personal self-assessment tax return, including a partnership supplement, and the nominated partner (the one representing the partnership to HMRC) must also file a partnership tax return for the partnership itself.

Each partner is responsible for their own personal tax return and any fines incurred by late submission but all partners who were part of the partnership during the period covered by the return are liable for any fines incurred if the partnership tax return is late. If the partnership tax return is late, the partnership is fined at the single person rate x the number of partners, with each partner having to pay their share!

When are self-assessment tax returns due?

If HMRC requests a tax return from you, you must submit it by the due date or face penalties. If you think it doesn't apply to you, you can ask them to withdraw the request (call 0845 900 0444).
  • Paper returns are due by midnight on 31st October following the end of the tax year*. This is not the last date you can post it, this is the date by which it must arrive at HMRC - recorded deliveries are always a good idea.
  • Online returns are due by midnight on 31st of January following the end of the tax year*. This is the easiest way to do a tax return and gives you a very quick answer about your tax situation since it is processed then and there by HMRC's online software.
*The end of the tax year for personal tax is 6th April each year.

Only two types of tax return are allowable as paper returns for 31st January: SA700 - Non-resident Company Tax Return and SA970 - Trustees of Registered Pension Schemes.

The partnership tax return can only be submitted online by commercial software so it is important to ensure your partnership tax return is in by the due date for paper returns if you have not purchased such software. However, each partner's individual tax return can be made online as usual through the HRMC website. It is recommended that you submit the partnership tax return first.

Penalties for missing the Self-Assessment tax return deadline

The penalties for late self-assessments are cumulative; the later you submit your return, the more you pay. This is independent of when you pay the taxes themselves and on top of any fines for late taxes or errors in the returns. They apply even if you have no tax to pay or have already paid the tax you owe.
Length of delayPenalty you will have to pay (% of tax due is not applied to late partnership tax returns)
1 day lateA penalty of £100
3 months late£10 for each following day - up to a 90 day maximum of £900.
6 months late£300 or 5% of the tax due, whichever is the higher
12 months late£300 or 5% of the tax due, whichever is the higher. In serious cases it may be up to 100% of the tax due instead.

Penalties for under-assessment of tax due

In addition to this, the penalty payable where your tax has been under-assessed because of failure to send a tax return within 30 days of the due date is up to 30% of the potential lost revenue HMRC could have had if that return had been made and taxes paid.

Penalties when overseas funds and income are involved

If your self-assessment tax return involves funds and income from overseas, HMRC may increase the penalties depending on how they categorise the territory they have to retrieve the relevant information from. The categorisation refers to how difficult it is for them to get tax information for an individual and is as follows:
  • Category 1 - country has automatic exchange of information - all penalties are same as UK
  • Category 2 - country only exchanges information on request - multiply all penalties by 1.5
  • Category 3 - country does not exchange information with the UK or does not meet international standards - multiply all penalties by 2
If you have a good excuse for filing your return late, it really is best to let HMRC know as soon as possible rather than waiting until you have to pay penalties then making an appeal against them. Note that for partnership tax returns, which are made by the nominated partner, only the nominated partner can make representation to HMRC regarding the partnership tax return.

Example for one person (from HRMC's website)

Mrs A's tax return is due on 31 January 2013 but HMRC doesn't receive it until 5 August 2013.

It is over 6 months late so she will have to pay all of the following:
  • £100 fixed penalty
  • £900 penalty - this is £10 each day from 1 May to 29 July, when the maximum 90 day penalty is reached.
  • £300 or 5% of the tax due - whichever is the higher
Her minimum penalty for filing her self-assessment tax return just over 6 months late would be £1300.

Example for partnerships

Remember, each partner is responsible for their own personal tax return so if one partner is late, that partner will be charged personally like Mrs A in the example above and the others will be OK. However, if the partnership tax return is late, all of the partners will be liable for that and have to pay their share.

The Triple A Partnership's tax returns are all due on 31 January 2013 but HMRC doesn't receive the partnership return until 5 August 2013.

It is over 6 months late and there are 3 partners so that's a fine at the rate of single person x 3 and they will jointly have to pay all of the following:
  • £300 fixed penalty - this is £100 for each partner
  • £2700 penalty - this is £30 each day (£10 x 3) from 1 May to 29 July, when the maximum 90 day penalty is reached.
  • £900 - this is £300 for each partner
The partners got their own personal tax returns in on time so no penalties for that but the partnership return was late so their penalty for filing the partnership tax return just over 6 months late would be £3900. Each partner would be liable for their share, so that's £1300 each.

Penalties for inaccuracy in the self-assessment tax return

Regardless of whether you file them on time or not, HMRC can fine you for errors in any document you return to them, including self-assessment tax returns. In particular they are concerned with the following conditions (which lead to an under-payment of tax):
  • an understatement of the person's liability to tax.
  • a false or inflated statement of a loss by the person.
  • a false or inflated claim for a repayment of tax.
If you have overseas income involved, you may face even higher penalties. The resulting inaccuracy penalties will be a percentage of the potential lost revenue HMRC could have had if that return had been made and taxes paid as follows:
ClassificationNormal penaltyOverseas category 1Overseas category 2Overseas category 3
Reasonable care taken to avoid inaccuracyNo penaltyNo penaltyNo penaltyNo penalty
Careless0% - 30%0% - 30%0% - 45%0% - 60%
Deliberate not conealed20% - 70%20% - 70%30% - 105%40% - 140%
Deliberate concealed30% - 100%30% - 100%45% - 150%60% - 200%
Attibutable to another person30% - 100%30% - 100%45% - 150%60% - 200%
Understated assessment not notified within 30 days0% - 30%0% - 30%0% - 45%0% - 60%
When calculating the penalties, HMRC take into account not only intent to deceive but also how the error was disclosed.
  • An unprompted disclosure is where the inaccuracy is reported by you or your agents while you had no reason to think HMRC would find it themselves.
  • A prompted disclosure is one where the inaccuracy is discovered while you have reason to believe HMRC might have been able to discover it themselves (ie your accounts are under review and you decided to check them again).
Unprompted disclosures always reduce the penalty significantly.

HMRC will also take into account the timing and amount you do of these activities as mitigation factors:
  • telling about inaccuracies - the more information and explanation you give, the better.
  • helping HMRC resolve the inaccuracies - giving positive assistance, volunteering information and actively engaging in the process will benefit you.
  • allowing HMRC access to your business records and any other relevant documentation.
You may be able to get a suspended penalty if it is deemed that the error was a one-off and you don't make any more errors or file any late returns during the suspension period.
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