Taxable income is reported to HMRC in a self assessment tax return.
HMRC currently collects income tax and capital gains tax (CGT) through a system of self assessment.
Tax is usually deducted at source on employment income, interest and pensions, but anyone with other income (there is a more detailed list at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return) is likely to need to report it to HMRC in a self assessment tax return (SATR) for the tax year, which runs from 6 April to the following 5 April. Partnerships and Trusts also have to submit SATRs each year.
If you have not received a tax return notification from HMRC, and you need to submit one, you must notify HMRC by 5 October following the tax year; late notification penalties may apply if you fail to do so.
The deadline for submission of the SATR is 31 October following the tax year if you submit a paper return, or 31 January following the tax year if you submit your return online. Again, there are penalties for late submissions.
Any tax payable is due to be paid by 31 January following the tax year. If the income tax that was not deducted at source is over £1,000, you will need to make payments on account (POAs) for the following tax year on 31 January within the tax year and 31 July following the tax year. This means you may need to make your first POA for the following tax year on the same day as the payment for the year in question is due.
You can apply to have the POAs reduced if you believe they are excessive in comparison to the expected tax, but you may be charged interest if you reduce them too far.
If you have made a mistake, you can amend a return within 12 months after the filing deadline by resubmitting a corrected return. After 12 months you will need to write to HMRC to notify them of the change.
Once you have filed your SATR, HMRC have 12 months in which to open an enquiry into the return. This may be because a figure does not agree with figures that they have received from other sources, although they can simply correct obvious errors, without opening an enquiry. In addition, HMRC randomly select a number of SATRs each year for checking, so if you have an enquiry into your return, it does not necessarily mean that your return is wrong. You can take out fee protection insurance to cover professional fees for dealing with such an enquiry.
Tax Innovations provides services to taxpayers requiring assistance with self assessment, from registering for self assessment and submitting returns, to dealing with HMRC enquiries quickly and efficiently.
If you would like more information regarding self assessment tax returns, or if you need help with submitting a return or an open enquiry, please contact Tax Innovations on 01962 856 990 or firstname.lastname@example.org.