An estimated 750,000 people missed last year's self-assessment deadline for submitting their tax return. Were you one of them? What was your excuse? And how can you make sure that you aren't late this time? Article by Nick Green.
Are you going to meet the 31 January deadline for submitting your self-assessment tax return for the tax year ending 5 April 2019? Or will you spend the time instead thinking of excuses?
‘I forgot.’ ‘I was busy with work.’ ‘It looked complicated so I kept putting it off.’ ‘I didn’t realise I had to do it.’ There are many reasons you might give for not filing your tax return on time, and by February another seven-hundred-odd thousand people will be reflecting on theirs, and asking: was it worth it? The initial £100 fine is just the start; it rises by ten pounds for every day you are late, so after three months it will be £1000 – after which additional penalties start to bump it even higher.
HMRC gives well over half a year’s notice of the need to submit a tax return, and if you do it regularly then the January deadline should be a fixture on your calendar. So why do so many people still miss the date and pay the price? There must be some genuine tax-dodgers among the 750,000-plus, but what of the rest?
Let’s break them down by their possible excuses:
‘I didn’t know I had to submit a tax return.’
This is more credible than it sounds. You may already believe (or even know) that you don’t owe any tax for the past year. But this is irrelevant. The wording of the notice makes it clear that you must still submit your tax return. Remember that this penalty is for late filing, not late payment (there separate penalties for late payment! – although these, perhaps surprisingly, are less severe). Believe it or not, even if you are due a tax rebate, but are late submitting your return, you can still be fined for lateness.
‘I forgot to do my self-assessment.’
Less forgivable, but it can happen. You may find that the generous notice HMRC gives you is actually too generous – in April you think, ‘That’s plenty of time,’ and then put the notice aside for months, until the inevitable happens. Why you then don’t notice the many reminders in the media is another question entirely.
‘Self-assessment tax is too complicated.’
Even if your tax affairs are simple, tax returns are tricky things – when you do something only once a year, you don’t get much practice. And if our schooldays taught us one thing, it was how to put off doing difficult homework. Irrational it may be, but that doesn’t stop some of us from hoping the tax return will just go away. Then, by the time it becomes urgent, there’s not enough time to meet the deadline.
‘I don’t have the money at the moment to pay the tax.’
Cash-flow crises can strike at any time – but these are not a reason to delay self-assessment. As noted above, the penalties for late filing are substantially higher than those for late payment, so you’ll still be better off if you file on time, even if you can't pay the actual bill.
What do these excuses have in common? They happen when self-assessment becomes one burden too many. This is why it can be far more economical in the long run to engage an accountant or financial adviser to handle your tax return. Even if you're on course to be one of the punctual filers this year, it is still often worth hiring a professional. If you’re not an expert, self-assessment can use up valuable time when you could be earning money doing what you do best. You can also end up saving much more in tax than you pay for the advice – an accountant may charge as little as £150 for a tax return (what’s more, that’s the fine you would pay if your return were late by a single week). A good accountant should also ensure better record-keeping, so there isn’t that last minute dash to find vital documents. Best of all, if you make it your adviser’s job to remember, then you’ll never risk forgetting to submit your tax return again.
A financial adviser or an accountant can save you from any future costly embarrassments regarding your self-assessment. Search for your new 'friend with benefits' below.