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Last Updated: Friday, 25 January 2008, 10:42 GMT
Tax deadline: Delay at your peril
Money Talk
By Patricia Mock
Private client services director, Deloitte

Patricia Mock
HM Revenue & Customs' advertising campaign means that most people will be aware that this weekend is the last weekend before the 31 January filing date for 2006/07 tax returns.

What should you do if you have still not filed your tax return?

The first thing to be aware of is that online filing may not be possible for you now.

To file online, you need to be registered with HMRC.

The closing date for this was 22 January 2008, so if you do not already have a registration, you will not be able to get one now and will have to rely on filing a paper return.

Income

So once you have found your return, the first thing to do is to gather together all the information you need to complete it.

This will include your P60 and P11D, if you are employed, or details of your self-employment income and expenses, if that is your status.

You will also need details of any investment income (bank interest, dividends received etc) and any other income - for example, income from property rented out, net of expenses, including mortgage interest.

If you are UK-domiciled, then all income is taxable, whether it arises in the UK or outside.

Certain income, however, is exempt from tax - for example, income from PEPs, ISAs and National Savings Certificates.

You will also need details of outgoings on which you can claim tax relief.

One example is pension contributions, although for company schemes, relief is normally given through your employer's payroll under the PAYE system. If so, no entry is needed on the tax return for them.

You can also claim relief for donations to charity made under gift aid, so again the records are necessary.

Capital gains tax

If you have made capital disposals, such as share sales, totalling more than 35,200, or your capital gains for the year exceeded 8,800, then you will need details of the sale proceeds and costs in order to calculate the capital gains arising.

Completing the return itself is reasonably straightforward

If the gains exceed 8,800, then capital gains tax will need to be paid, along with any income tax due, by 31 January 2008.

Again, certain gains are exempt from tax and the HMRC help sheets set out various examples.

Completing the return itself is reasonably straightforward, although care is needed to ensure the relevant income and gains are reported correctly.

HMRC have produced guides to assist taxpayers on how to complete the pages, and these can be downloaded from the HMRC website at www.hmrc.gov.uk.

If you have income from a new source, such as property, this year, you are likely to find that HMRC have not sent you the relevant page to complete.

Although this can be ordered from the HMRC orderline, you may prefer at this stage to download the form from www.hmrc.gov.uk

Tax calculation

If you are filing a paper return at this stage, you cannot ask HMRC to calculate your tax liability.

HMRC web site advertisement
There is still time to file, says HMRC
You will therefore need to do this yourself.

You will also need to include the relevant figure on the return and pay the tax due, together with the first payment on account for 2007/08, if you are liable to make payments on account.

HMRC supply a detailed form which you can complete manually to calculate the tax due, or you can purchase one of the various brands of computer software available to do this for you.

At least one will calculate the tax due for free.

What if you have not got the information you need?

If you cannot locate the information you need, then you could delay filing your return until you do.

However, if you do not file your return by 31 January, then HMRC will charge a penalty of 100, plus a further 100 if the return is still not filed by 31 July.

But the penalty will be reduced to nil if all your tax due is paid by 31 January.

So you could estimate the tax due and pay this over, and file your return when you have located the information.

Alternatively, you could file the return showing provisional figures (ticking box 23.2 to show that this is the case, and providing additional details in box 23.9) and provide the correct figures when these are available.

You should still pay the tax due, as interest - currently at 7.5% - is charged on tax paid late.

A surcharge of 5% is also charged on any tax outstanding at 28 February, together with a further 5% if the tax is still outstanding six months later.

Changed circumstances

What if you have not been issued with a tax return?

HMRC will also charge interest on overdue tax, and surcharges of up to 10%

It is up to the taxpayer to notify HMRC if he or she is chargeable to tax, so do not think that because you have not been issued with a return that you have no responsibilities.

If you are chargeable to tax for 2006/07 then you should have notified HMRC of this by 5 October 2007.

However, if any tax due is paid by 31 January, then no penalty will be charged.

So, if you think you have tax to pay, you should download the relevant pages from the HMRC website, complete them and ensure the return is filed (your local tax office will tell you where to file the return) and the tax due is calculated and paid by 31 January.

Even if you are taxed under PAYE, if your circumstances have changed, then it is up to you to notify chargeability, complete any tax return and calculate and pay over the tax due.

That might be because you have received untaxed income, set up self-employment, made a large capital gain etc, so that you are liable to tax.

What if you delay?

If you do nothing, HMRC will charge a penalty of 100 if a return is not filed and the tax due is not paid by 31 January.

A further 100 penalty is charged if this is still the case at 31 July.

HMRC will also charge interest on overdue tax, and surcharges of up to 10%.

The combination of all of these can add up alarmingly quickly.

HMRC also have powers to charge penalties equal to the tax due, and flat-rate penalties of up to 60 per day for late returns.

They also have the power to estimate the tax due from errant taxpayers and issue demands accordingly, and over recent years it seems that they are increasingly likely to do so.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



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