File your Tax Return by 31 January or Pay the Penalty

Figures released by H M Revenue & Customs reveal that many people still wait until the last minute to file their Self Assessment tax returns. More than 9 million Self Assessment returns are issued annually followed by blanket media coverage warning of the penalties for late submission. Even so, every year, almost one in ten people miss the 31 January filing deadline resulting in one million people receiving an automatic £100 fine. Further delays will result in additional penalties with the worst offenders being fined up to £60 per day.A paper tax return, must have been be filed by 31 October 2010. Returns filed after that date will incur a further £100 penalty. The alternative is to use the internet.

Fortunately, online filing can be quick and easy. HMRC are rightly proud of their online system which offers an efficient way to file. However, be prepared to join a queue as filing at the last minute is a popular pastime for even the most efficient of people.

Over 8 million tax returns ( link: http://twdaccounts.co.uk/services/individuals/self-assesment-tax-return.html )had been filed by 31 January 2010 for the tax year 2008/09   Of these, 66% (compared with 43% in January 2009) were filed via the internet. Over 3 million tax returns arrived in January 2010. What is interesting is that 845 tax returns were submitted on Christmas Day 2010, and, 2408 on Boxing Day.

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There is no actual deadline for registering to file online. However it is advisable to register before 21 January as it takes up to 7 days for a PIN (Personal Identification Number) to be sent out. It is also worth noting that in 2001 only 38,981 people filed their returns online, which by 2009 had increased to a whopping 6.4 million.

Currently there is no necessity to file on line, you could of course submit the paper return and accept the £100 penalty. It is possible to take advantage of the current ’capping’ on penalties. This means you cannot be fined more than you owe. If you know you are due to pay tax, and know the amount, then pay it before 31 January because even if you submit a paper return your penalty will effectively be £0.

However, you should be aware that HMRC envisage this to change from October 2011. New penalties are expected to be introduced and no penalty will be ‘capped’. This means that £100 will become payable if your return is late, regardless of your outstanding balance. The changes will affect the 2010-11 tax returns, which are due to be filed by paper on 31 October 2011 and online by 31 January 2012. Additional penalties will also apply if you continue to delay the submission of your tax return.

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If you have not submitted your 2010 return yet, don’t worry, you still have time to get it in.

Whichever method you choose, our advice is never to leave it until the last minute. At the least it becomes fraught, but it can also mean mistakes are made that could cost you money.

By Mike Parkes, TWD Accountants, January 12, 2011.

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