Act now to avoid income tax fine

More than three million people have already filed online, about 25% more than at this stage last year, with many more submitting paper returns.

But the annual deadline to pay the necessary tax, was missed by about 900,000 people in 2007.

HM Revenue & Customs expects a rush of submissions on Thursday.

"About 150,000 people filed on the last day last year," said an HMRC spokesman.

"This is the busiest week of the year for both online and paper filings," he added.

To encourage people to get a move on, the Revenue has launched a last-minute advertising campaign with 848 road side hoardings, 28 of which are at London Underground stations, and 443 adverts at selected ATMs.

Leeway

Returns filed on Friday will be regarded as having been filed on time says the Institute of Chartered Accountants in England and Wales (ICAEW).

"As long as the form is at the tax office by midnight on 1 February or filed electronically by then, no penalty will be incurred even though it is technically late," said Anita Monteith of the ICAEW.

"This includes tax returns put through tax office letter boxes before the office is next opened - HMRC will assume the return was filed before midnight on 1 February.

"But anyone seeking to rely on this quirk in the rules to avoid a penalty should beware - not all tax offices have letterboxes," she added.

For people who have left it very late and have only just realised they have a deadline to meet, accountants advise paying some money as an estimate, and then finalising an accurate figure as soon as possible afterwards.

"If you are struggling with your return, do put an estimate in," said John Whiting of accountants PwC.

"It doesn't mature like a fine wine".

Avoid the fine

Even if a fine is levied, it will be cancelled if it turns out that the tax payer had no tax to pay.

The Revenue thinks this probably applied to about half of the 10% of self-assessment tax payers who last year failed to file on time.

"If you have paid all your tax then the penalty comes down to nil," said Mr Whiting.

That is because the rules state that the £100 fine cannot exceed the tax and national insurance that is outstanding.

So, no tax to pay, no penalty either.

But unless people are confident this is their position then taking such an attitude is risky.

Not only does interest accrue at a rate of 7.5% annually on any unpaid tax, another £100 fine kicks in if the return has still not been paid by 31 July 2008.

Anyone hoping to file online will find they have probably left it too late, unless they have already obtained a PIN number to use the Revenue's system.

Taxpayers cannot use the e-filing system unless they already have that number, and it is only sent out by post.

Anyone asking for it now, and expecting it to arrive in time for a very late filing, is "cutting it very fine" said a Revenue spokesman.

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