Landlords Tax Services Ltd - The complete tax service for the residential property landlord

Technical notes

SELF ASSESSMENT

• HMRC no longer “agree” figures
• Get it right, and on time – or pay the price
• Nine million Self Assessment tax returns now filed each year
• 104,000 tax returns filed on-line on 31st January 2007 – before the HMRC computer crashed
• 900,000 tax returns are filed late each year
• Increasing pressure to file on-line
• Keep your records or risk a £3,000 fine

The principle is quite simple. You should know whether or not you have a source of income that is untaxed or not taxed at the right rate. If this is the case you must tell HMRC by 5th October following the end of the tax year in which the income first arose unless you have been sent a tax return to complete.

If the taxable income is less than £2,500 and you are in employment HMRC will collect the tax through the PAYE scheme. But you must write and tell HMRC the amount. If the income exceeds £2,500 HMRC will send you a tax return. Once you have a tax return you have until the later of 30th September and two months after the return was issued if you want HMRC to calculate the tax due, and 31st January and three months after the return was issued if you want to calculate the liability yourself. In any event you have until 31st January in the year following the end of the tax year to pay any tax due.

In the 2007 Budget, Gordon Brown announced that he'd accepted the recommendations of Lord Carter - in his review of HMRC's online services - and from 2007-08, has brought forward the deadlines for filing self-assessment tax returns from January 31 to September 30 for paper returns. The deadline for returns filed on-line remains 31st January.

On top of the automatic penalty of £100 charged for returns not received by 1 February, if the tax return is still outstanding by 31 July a second £100 fine is incurred. A penalty can also be imposed based on the amount of tax owed for the year if returns are still overdue 12 months after the filing date.

The tax year runs from 6th April one year to 5th April in the next. The first payment is made in January during the tax year and is one half of the liability for the previous year unless the liability for the previous year was under £500. Assuming your return has not been submitted and processed by 31st July, the second instalment is due on that date and is the same amount. You are required to submit your return by 31st January following the end of the tax year together with any balancing amount of tax due (on-line filing only).

Interest is charged on tax paid late. This applies whether the late paid tax is either of the two payments on account or the balancing payment.

To avoid interest and penalties you should keep a close eye on the important dates throughout the year.

Records of all information used to complete tax returns must be kept for 22 months after the end of the tax year, or for 5 years and 10 months for those carrying on a business or who have income from letting out property. There is a maximum penalty of up to £3,000 for each tax year for which records have not been kept.

DISCLAIMER
© Landlords Tax Services Ltd 2008 All Rights Reserved - In an article such as the one on this page we can only give brief general guidance and cannot cover all situations. This guidance may not cover all your personal circumstances and so you should not rely on it. Before taking action or not, always do your own specific research and seek appropriate professional advice which takes into account your personal circumstances, with the full facts of the case and all documents to hand. Neither Maurice Patry F.C.A. nor Landlords Tax Services Ltd can be held responsible for the consequences of any action or the consequences of deciding not to act.