Personal tax – self assessment

At AHACCOUNTANTS, we summarize the self-assessment rules and penalties for failing to comply with your obligations. If you live in the Nottingham area, we can prepare your tax return on your behalf and advise you on payments that may need to be made to HMRC.

The Self-Assessment Cycle

Under the self-assessment regime, an individual is responsible for ensuring that their tax liability is calculated and that any tax owing is paid on time. Tax returns are issued shortly after the end of the fiscal year, which runs from 6 April to the following 5 April (for instance, the 2024/25 fiscal year runs from 6 April 2024 to 5 April 2025). Tax returns are issued to all those whom HMRC is aware need a return, including self-employed individuals and company directors. Taxpayers who complete returns online receive a notice advising them that a tax return is due. If a taxpayer does not receive a tax return but has tax due, they should notify HMRC, who may then issue a return.

A taxpayer is normally required to file their tax return by 31 January following the end of the fiscal year. The 2024/25 return must be filed by 31 October 2025 if submitted in paper format. Returns submitted after this date must be filed online; otherwise, penalties will apply.

Penalties

Late filing penalties for personal tax returns are as follows:

• £100 penalty immediately after the due date for filing (even if there is no tax to pay or if the tax due has already been paid). The full penalty of £100 is always due for late filing, regardless of any outstanding tax.

Additional penalties may apply:

• Over 3 months late: A £10 daily penalty, up to a maximum of £900.
• Over 6 months late: An additional £300 or 5% of the tax due, whichever is higher.
• Over 12 months late: A further £300 or a further 5% of the tax due, whichever is higher. In particularly serious cases, there may be a penalty of up to 100% of the tax due.

Calculating the Tax Liability and ‘Coding Out’ an Underpayment

Taxpayers have the option to request that HMRC compute their tax liability in advance of the tax being due; in this case, the return must be completed and filed by 31 October following the fiscal year. This is also the statutory deadline for making a return if you require HMRC to collect any underpayment of tax through your tax code, known as ‘coding out.’ If you file your return online, HMRC will extend this deadline to 30 December. Whether you or HMRC calculate the tax liability, there will be only one assessment covering all tax liabilities for the tax year.

Changes to the Tax Return

Corrections/Amendments

HMRC may correct a self-assessment to rectify any obvious errors or mistakes in the return. Individuals can amend their self-assessment by notifying HMRC at any time within 12 months of the date of submission.

Enquiries

HMRC may inquire into any return by giving written notice. The time limit for HMRC to do so is typically within 12 months following the filing date. If HMRC does not inquire into a return, it will be final and conclusive unless the taxpayer makes an overpayment relief claim or HMRC makes a discovery.

It’s important to note that HMRC cannot query any entry on a tax return without initiating an inquiry. The primary purpose of an inquiry is to identify any errors or omissions that result in an understatement of tax due. However, the opening of an inquiry does not imply that a return is incorrect.

If there is an inquiry, we will receive a letter from HMRC detailing the information necessary to check the return. If this occurs, we will contact you to discuss the contents of the letter.

Keeping Records

HMRC requires that records underlying the return exist in case they decide to inquire into it. Records are needed for income, expenditure, and reliefs claimed. For most types of income, this means retaining the documentation provided by the payer. If expenses are claimed, supporting records must be kept.

Checklist of Books and Records Required for HMRC Inquiry:

Employees and Directors

• Details of payments made for business expenses (e.g., receipts, credit card statements).
• Share options awarded or exercised.
• Deductions and reliefs.
• Documents signed or provided by someone else, including:
  • Interest and dividends.
  • Tax deduction certificates.
  • Dividend vouchers.
  • Gift Aid payments.
  • Personal pension plan certificates.
  • Personal financial records supporting claims based on amounts paid (e.g., certificates of interest paid).

Business

• Invoices, bank statements, and paying-in slips.
• Invoices for purchases and other expenses.
• Details of personal drawings from cash and bank receipts.