In recent years there has been an ‘entrepreneurial boom’ in the United Kingdom. As a result the number of self-employed people has grown dramatically, becoming one of the most important parts of the UK workforce.
While this means more independence and flexibility for the self-employed, it also entails new responsibilities. One of these responsibilities is to declare and pay tax liabilities before January 31st each year. While 93.4% of filers complete their tax return on time, a large amount of applications are filed on the day of the deadline resulting in an increased possibility of late submissions and unnecessary stress.
To avoid this stressful situation and the possible consequences of late submission, it is advised to commence the process well ahead of the deadline.
Four simple steps, described on the HM Revenue & Customs website can help you to do so:
1. Find your online activation code. You can request a new code if yours has been lost.
2. Collect your receipts and separate business expenses from income.
3. Use the online service to start your Self Assessment.
4. Complete and send your tax return.
Why should you fill in your tax form before the 31st of January?
To use the HMRC online service, you will first have to register. You will have to wait for up to seven days for a Personal Identification Number so do not leave registering for online filing until 31 January. If you do, your return will be late and you will incur a late filing penalty.
The online tax return will ask you a series of questions to bring forward only the relevant parts of the tax return. It will do the calculations for you and provide on-screen help as you go along. There are other built-in checks to help you get it right.
Your tax bill will be worked out automatically and you will receive an acknowledgement that your tax return has been safely received.
What are the penalties for not filling out the form?
There is now an automatic penalty of £100 for filing a late return, even if no tax is owed. After three months, a £10 daily charge kicks in up to a maximum of £900, followed by further penalties at six months and 12 months. This means you could owe up to £1,600 in penalties regardless of how much tax you need to pay.
By law, you must keep the records you need to fill in a complete and correct tax return. If your return is incomplete and you are then found to owe tax, you may also have to pay interest and a penalty. You can find further information on the HM Revenue & Customs website.
Finally, please go to the self assessment tax form to fill in your tax return before the 31st of January.