In this area of the website we try to help you work out what your basis year is for taxing your profits and what happens if you change your accounting date. We also look briefly at overlap relief and how it can affect the amount you are taxed on.
We then look at self-assessment (SA) - who needs an SA return, important dates for SA, payments on account and how they work together with tax calculations and determinations.
The topics covered are:
What is self-assessment (SA)?
Do I need to complete an SA return?
What records do I need to keep?
Important dates for SA
What if I have problems in completing my return?
How do payments on account work?
The tax calculation
The self-assessment statement
Overpaid tax under self-assessment?
What is a determination?
What is a reasonable excuse for a late tax return?
- Self-assessment is not a new tax nor is it a tax at all. The idea of self-assessment is that you are responsible for completing a tax return if you need to. Click here to see if you need to complete a return and for paying any tax chargeable for that tax year.
Back to the top
Self-assessment does not affect everyone and you will normally only need to complete a form if you:
- Are working for yourself - you are self employed
- Are a company director (except not for profit organisations)
- Are a minister of religion (any faith or denomination)
- Are a partner in a business
- are a 40% taxpayer although there are some exceptions to this
- Are a trustee or the executor of an estate
Also if you have:
- Untaxed income e.g. interest that is not taxed before it is paid to you e.g. Most National Savings products or rents. If you are an employee and the income is less than £2,500 a year a tax return may not be necessary but if you receive other untaxed interest and the tax due on it cannot be collected via your PAYE coding notice you will need a tax return.
- If you receive regular annual income from a trust or settlement or income from the estate of a deceased person and further tax is due on the income
- Taxable foreign income whether or not you are resident in the UK and including non resident landlords
- Savings and investment income of £10,000 or more before tax
- Annual income of £100,000 or more before tax
- Tax due at the end of the year that cannot be collected via your PAYE coding notice for that year
- Untaxed income of £2,500 or more but if you are a pensioner you may be able to pay your tax through your PAYE Coding Notice
- Claims for expenses of £2,500 or more
- Higher age allowance as you are 65 or over and your allowance is reduced because of the level of your income - for 2011/12 your income will be over £24,000
- Capital gains where:
- You have given away or sold assets worth £42,400 or over for 2011/12;
- Or you have a capital loss but your gains before losses are more than the annual exemption for 2011/12 of £10,600 (£10,100 for 2010/11)
- Or if you have no losses to claim but your gains are more than the annual exemption for 2011/12 of £10,600
- Or you need to make any other capital gains tax claim or election for the year
Her Majesty's Revenue & Customs (HMRC) may also want you to complete a return for other reasons or you may choose to complete the form.
For more information on any of the above please have a look at the HMRC SA Guidelines.
Back to the top
How long do I need to keep my records?
- If you are self employed and carrying on a business you need to keep your records for five years from 31 January following the tax year for which the tax return is made. So for example for the 2010/11 tax return sent to you in April 2011 the following 31 January will be 31 January 2012 - you must keep your records until 31 January 2017.
- If you are not self employed but you need to complete a self-assessment tax return you will need to keep your records for at least 22 months from the end of the tax year to which they relate.
- For example - your 2010/11 tax return issued in April 2011 - records will need to be kept until at least 31 January 2013.
- There are some situations when you may need to keep your records longer:
- If there is an enquiry into a tax return you must keep all records until the enquiry is closed. HMRC have 12 months to tell you that they intend to start an enquiry from when they receive the return. So for example if your 2010/11 return was received by HMRC on 31 August 2011 - HMRC will have until 31 August 2012 to enquire into the form.
- If you sent back your return late so the HMRC enquiry window has been extended - you must keep all your records until the latest date for starting an enquiry has passed. HMRC can start an enquiry up to a year after the quarter date following their receipt of your tax return - the quarter dates are 31 January, 30 April, 31 July and 31 October
- For example if you sent in your 2010/11 return to HMRC on 31 March 2012, they will have one year after the end of the quarter date - so that is one year after 30 April 2012 in which to tell you they are starting an enquiry. You must therefore keep your records until at least 30 April 2013.
- Where you amend your tax return - HMRC can start an enquiry at any time up to a year after the quarter date following their receipt of your amendment - so say you amend your 2010/11 tax return on 1 September 2012 - HMRC have until 31 October 2013 to enquire into the amendment - the normal dates apply to the rest of the return.
What records should I keep?
Individuals
Basically you should keep anything you use to complete your tax return. These may be relatively current documents but if you have a capital gain you may need to refer to older records as well.
You can keep your records on a computer but if any tax has been deducted from the income you will also need to keep the original hard copy documents.
In more detail some specific records you need to keep (although there may be others) are :
If you are an employee
- Form P60 (end of year statement of pay and tax deducted) and your payslips for the tax year
- Form P45 (part 1A) if you have changed your job at all in the tax year
- Form P160 (part 1A) if you retire and go on to receive a work related pension
- Details of any work related income such as tips which are not included on form P60
- Form P9D or P11D in respect of any benefits in kind and expenses payments - your employer should have given you a copy of the completed form for you to keep
- Details of any work related subscriptions you pay personally
- Your coding notice for the tax year
If you are a pensioner
- Any paperwork you receive showing the amount of any state benefits you get including your state pension
- Form P60 (end of year statement of pay and tax deducted) for each work related pension
- If you receive retirement annuities from a pre July 1988 pension policy - you need to keep any paperwork sent to you by the annuity payer
- Your coding notice for the tax year
If you receive any income from UK investments such as bank. building societies or dividend income or any income from trusts
- Any bank or building society passbooks, statements and certificates
- Any statements or certificates of income in connection with other investments you hold
- UK company dividend vouchers including those where shares are received instead of cash and any tax vouchers in respect of holdings of unit trusts
- If you have a gain on a life insurance policy you need to keep all the paperwork that the insurance company sends you
- If you receive income from a UK trust you will be given a certificate of income by the trustees and you will need to keep this
- Any other information connected to your investments or savings which you think may be relevant to your tax return - it is a well to keep all this paperwork just in case it may prove useful
If you have any other income or expenses
- You should keep any paperwork regardless of whether or not you think the income should go on your tax return - this will apply to income such as casual earnings or commission etc.
If you have a capital gain or capital loss
- It is worth keeping a folder of all the purchase and sale details (contract notes, completion statements etc.) of any assets you buy which may be liable to capital gains when you sell them. This will include property (apart from your own home), shares or other assets you give away or sell. Keep any valuations of the assets as well if one was carried out.
- If you have a property and you carry out improvements - keep copies of the invoices for your expenditure with the other information for the property. This other information should include your estate agents costs, legal costs and stamp duty.
- If you receive an asset as a gift or an inheritance - it is worth keeping any paperwork that related to the gift or inheritance including letters or solicitors accounts.
- It may also be helpful to keep copies of any bank statements or cheque book stubs in connection with the purchase, sale or improvement of your assets.
- If you use your own home for business or you let out part of it - you need to keep records of dates and rooms used.
If you need to claim any reliefs or deductions
- Details of payments made under Gift Aid
- Certificates of pension payments made issued by the insurance company
- Any court order in connection with maintenance payments paid by those born before 6 April 1935
- If you paid loan interest that is eligible for tax relief you will need to keep the certificate issued by the loan maker.
Businesses
What business records do I need to keep?
If you are in business as a self employed sole trader or a partnership (including property letting businesses) you need to set up a system for keeping your records.
It is very important you keep your personal records separate from those for your business.
HMRC are currently updating their guide to keeping records but the earlier leaflet set out their requirements as follows:
- record all sales and other business receipts as they come in, and retain the records
- keep back-up records, for example, invoices, bank statements and paying-in slips to show where the income came from
- record all purchases and other expenses as they arise and ensure, unless the amounts are very small, that you have, and retain, invoices for them
- keep a record of all purchases and sales of assets used in your business
- record all amounts taken out of the business bank account, or in cash, for your own or your family's personal use
- record all amounts paid into the business from personal funds, for example, the proceeds of a life assurance policy.
Which accounts books you need to keep depends mainly on the size of your business but you should at the very least have a cash book - this would include payments to and from your bank, cash receipts and payments and any amounts you take out of the business. You may also want to keep a separate record book for your day to day small cash transactions - a petty cash book.
Some specific examples of records you should keep include:
- If you use your own home for your business you need to allocate running costs between private and business use.
- A record of all your own or your family's personal drawings from the business. This is money that your family or you take from the business bank account or petty cash etc for your own purposes.
- Details of any money or assets you introduce into your business
- Copies of business bank statements and building society passbooks/statements. If you do not have a separate business and private account you will need to keep an accurate record of which expenses are business are which are private.
- Wages records where you have employees or if you have subcontractors you need to keep records to support any payments you make.
- Unless you use your car or van specifically for the business you will need to keep a record of business use to include both running costs and fuel.
Back to the top
Not all these dates will apply, as you may not need to make any payments on account. We explain payments on account and how they work here.
31 January (during the tax year)
- The first payment on account for the tax year ending the following 5 April is due.
- See 31 January (after end of tax year) regarding paying the balance of tax for the previous year.
April (following end of tax year)
- The tax year ends on 5 April and shortly after this date anyone who is required to file a tax return will either receive a paper version of the tax return or, if you have previously filed online, a notice requiring you to file a tax return for the year just ended.
31 July (following end of tax year)
- The second payment on account for the tax year ending the previous 5 April is due.
- If you have not received a tax return but you have capital gains in excess of £10,600 for 2011/12 (£10,100 for 2010/11) or if you have some new source of taxable income where the income is not taxed before you get either entirely or in part, you will need to notify HMRC by this date.
- Depending on your circumstances they will then send you a tax return to complete. If you do receive a return you have 2 months from the date of issue to complete and submit the form if you want the options shown in the 31 October section to apply.
- If you did not get your return to complete until after 31 October, the latest date for sending it back to HMRC is the later of the following 31 January or 3 months after the return was issued.
- If you are sending in manually the paper version of your tax return this must be submitted by 31 October. If not received by that date an automatic penalty of £100 for late submission will be charged for returns submitted after 1 November. Even if you have no tax to pay or you have already paid the tax you owe you will have to pay this penalty.
- If you are filing your tax return online then you still have until 31 January to submit it. If you have manually submitted a paper return after 31 October do not then submit the return online and hope to avoid the penalty charge as HMRC will accept only the first return.
- An important point to note for those in business is that at the moment HMRC still do not provide an online partnership return.
- So for example - Rashid sends in a paper 2010/11 self-assessment tax return on 30 November 2011. He then gets access to the internet through his work and decides mistakenly that if he sends in his tax return online, he can cancel the paper one and extend the deadline for submission to 31 January 2012. This is not the case - HMRC will take the date you send in your return for any year as the date they receive the first return whether it be a paper one or online.
- If you want to guarantee that HMRC will be able to process your return and advise you regarding the amount of tax payable on the following 31 January, you need to have submitted the paper version of your tax return by this date.
- Bear in mind that HMRC will always calculate your tax for you whenever you send in your return even if submitted late. However if you send in the paper version of your tax return after 31 October they cannot guarantee to tell you in time what your payments of tax should be on the following 31 January. This could then mean that you will be also liable for the maximum penalty of £100 for submitting a late return.
- If you want to have your tax liability (where it is under £2,000 but see below for a change to this amount for later years) collected through your code number you need to have submitted your tax return by this date (but this is extended to 30 December if you file online). You can still request this treatment of your tax liability up to the end of November but there is no firm guarantee that HMRC will be able to include the tax in your code.
- After the end of November HMRC will not be able to collect the tax this way where you file manually.
- Until now HMRC have been able to collect underpayments through your PAYE code of up to £2,000. This amount is to be increased to £3,000 from 2012/13.
- The revised underpayment coding out limit applies to non-self assessment underpayments from 2010/11 onwards. This means that qualifying underpayments of up to £3,000 arising from your 2010/11 self assessment return will be automatically included in your 2012/13 tax code.
- Self-assessment returns issued in April 2012, for income arising in 2011/12, will allow you to elect on that return to have unpaid tax of up to £3,000 collected through your 2013/14 tax codes.
- The current limit of £2,000 will remain in place until 6 April 2012.
Penalties for late paper return filing
- Any paper version of the return filed after 1 November will attract a £100 penalty i.e. HMRC continue to allow the extra day before the penalty is charged.
- The penalty can be appealed against on grounds of reasonable excuse. However the excuse that using a computer is too difficult because you are not computer literate is not acceptable as a 'reasonable excuse'. The HMRC view is that if you have trouble using a computer, you should get help.
- The penalty cannot be cancelled by filing online another return by 31 January – the first return satisfies legally the filing obligation.
30 December (following end of tax year)
- If you are filing your return online you need to submit it by this date if you want HMRC to collect tax through your tax code, if possible, where you owe less than £2,000.
- All tax returns filed online must be submitted by this date. If after you have filed your tax return you become aware that an entry is incorrect you can amend that return up to 12 months from this date. If therefore you need to amend your 2010/11 tax return you have until 31 January 2013 to make the amendment. This applies whether you filed manually a paper version of the return or online.
- An automatic penalty of £100 is charged if HMRC have not received the return in time. Even if you have no tax to pay or you have already paid all the tax you owe.
- You can see how this works in the example Joanne.
- If you send your return in 3 months late you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900.
- If you are 6 months late you will be charged further penalties, which are the greater of 5% of tax due of £300.
- 12 months late and you will be charged more penalties, which are the greater of 5% of the tax due of £300. In serious cases this can rise to 100% of the tax due.
- As mentioned above the balance of tax due for the year ended the previous 5 April is now payable. You will need to take off any payments on account you made in January and July the previous year from the amount you are due to pay.
- Interest starts to run from this date on any unpaid tax. You can see this in more detail in the example on Julia. Interest is also charged on any unpaid penalties.
- We will be going into more detail about payments on account but many people will not need to pay anything on account and will simply just pay the total tax due for the previous year on 31 January following.
- You can see an example of when you do not need to make payments on account in Kofi.
Back to the top
- If you get a tax return, please do not worry about filling it in. You can contact HMRC for help. If you are concerned about completing the form contact the phone number on any of your SA correspondence or the Self -assessment helpline number 0845 900 0444 available 8am to 8pm - 7 days a week, closed Christmas Day, Boxing Day and New Year's Day.
- You will normally receive your tax return in April each year after the tax year finishes on 5 April. However there are some circumstances when you might receive your tax return at other times in the year and we have explained about this in more detail in the section on important dates for SA.
- To make it easier to make sure you have all the information you need, it is a good idea to put any paperwork that comes in during the tax year for your return in a file so that it is all to hand when you come to fill in the form.
- If you are manually filing a paper version of the tax return and have missed the 31 October deadline but think you have a reasonable excuse you can still file the paper version but you should send a covering note explaining why it is late.
Back to the top
- Whilst your employer or your bank or building society will take a lot of the tax you may need to pay from you, you may find that you have not paid sufficient for a particular year.
- This extra tax will be due on 31 January in the year following the tax year concerned.
- You can see this in more detail in the example on Robert 1.
- You will have to make payments on account if your previous year's tax was over £1,000 - unless more than 80% of the previous year's liability was covered by tax taken off at source (PAYE or tax taken off before you get it by banks, building societies or other sources such as companies when paying you dividends).
- You can see this in more detail in the example on Robert 2.
- If the tax you were due to pay was more than the above amounts you will need to make payments on account for the current tax year.
- These payments on account are based on the total of your tax bill for the previous year and you will pay half of that amount on 31 January in the tax year and half on 31 July following the tax year.
- On 31 January you also pay any balance of tax due for the previous tax year so remember you may have 2 amounts to pay.
- Have a look at the example on Robert 3.
- Where the amount that you think will be due for the current tax year has fallen, you can apply to reduce your payments on account at any time before the 31 January deadline for that year's tax return.
- You can download a form SA303 to claim the reduction from the HMRC website or you can ask any tax office to send you one.
- You can also make the claim on the previous year's tax return giving details of the circumstances in the additional information box at the end of the form.
- Please bear in mind that if you reduce your payments on account below what they should in fact have been you will have to pay interest on the shortfall from the date each payment on account was due and in some cases HMRC may charge a penalty if the reduction is excessive.
- You can see this in more detail in the examples on Robert 4 and 5.
- If HMRC make an amendment to your return or you notify them of an amendment that will increase the tax due, any extra tax will be payable 30 days from the date of the amendment although interest will run from the date that the tax should have been due.
- Have a look at the example on Robert 5.
Back to the top
- When you send your self-assessment tax return to HMRC before 31 October they will process the form and send you a tax calculation.
- The calculation sets out how they have worked out your tax and also explains what payments on account are due for that tax year and the current year. It is not a record of what tax you have paid - just what tax is in fact due.
- You should check the calculation and let HMRC know within 30 days of issue of any amendments that are necessary.
Back to the top
- Every so often under self-assessment, HMRC will send you self-assessment statements (SA300) and these forms tell you how much tax is due for payment and when, or how much they need to repay to you if you have overpaid tax.
- If you sent in your tax return before 31 October and HMRC did not send you a self-assessment statement in time to make the payment on account due on the following 31 January, they will only charge interest from 30 days after they issued the statement.
- If your overall tax bill is less than £32, HMRC will not normally send you a statement other than on an annual basis.
- There is a payslip attached to the bottom of the statement for your use and instructions on how to make your payment. HMRC are intending that payment by credit card will also be an option shortly.
- We explained in Important dates for SA that if you send in your tax return late, a penalty of £100 will be charged and this will be shown on the statement.
- Where you have a balance of tax due on 31 January for the previous tax year - if this tax is not paid by 28 February in that year, you will be liable for a surcharge of 5% of the amount still outstanding.
- This will be included on your self-assessment statement but HMRC will also notify you separately of the charge. The surcharge is not imposed on any payment on account also due on 31 January.
- HMRC will also charge interest on late payment of tax and this will be included on your statement as well.
- A further 5% surcharge will be payable in respect of any tax due on 31 January still unpaid by the following 31 July.
- If you are 12 months late you will be charged a further penalty of 5% of the tax that is still unpaid.
- Interest is also charged on any unpaid penalties.
- You can see this in more detail in the example on Julia.
Back to the top
There are two ways of claiming a refund, depending on the tax year you are claiming for.
Claiming for the last tax year
- If you have made a mistake on your tax return, you have 12 months from the return deadline to correct it. This is called an 'amendment'.
- If you filled in a paper tax return, write to your tax office, telling them what corrections to make to which boxes on the return. If you filed your return online, you may be able to make your amendment online.
- There is more information on this on the HMRC website - Correcting your tax return and claiming any refund
Claiming for previous tax years
- If you did not fill in a tax return for the year in question, write to your tax office and tell them why you are claiming. If you did complete a form, tell your tax office that you want to claim 'overpayment relief'.
- In most cases you will get back the tax you have overpaid as long as you claim on time. The time limits for claiming a refund are shown in the table below. If you do not make a claim within the time limit you will be unable to make a late claim for any refund due. But if HMRC has made a mistake with your tax these deadlines may be extended.
Time limits for claiming back tax
Tax year 2007/08 (year ended 05 April 2008) - you must claim by 05 April 2012
Tax year 2008/09 (year ended 05 April 2009) - you must claim by 05 April 2013
Tax year 2009/10 (year ended 05 April 2010) - you must claim by 05 April 2014
Tax year 2010/11 (year ended 05 April 2011) - you must claim by 05 April 2015
Back to the top
- If you do not send in your tax return by the deadline on 31 January, so that it is not clear how much tax you need to pay - HMRC may issue you with a 'determination of tax'. This is an estimate of your tax bill for the year and you cannot appeal against the figure.
- Any statements of account you get will include the determination of tax as a basis for your payments on account if you need to make them.
- The only way to get your tax reduced or amended to the correct figure is to send in your tax return for the year.
Back to the top
Introduction
Reasonable excuses
- You must have been ill at the time that you would have been preparing and submitting the return.
- The illness must have prevented you from dealing with your tax affairs. You must be able to show that as soon as you were able you gave attention to your tax affairs and submitted the return.
- You must produce medical evidence that you were ill. This could be a letter from a doctor or a copy of a sick note.
- It is unlikely to be acceptable when you appeal merely to say that you felt ill or had been generally unwell. The Tribunal will want to know the illness from which you were suffering and the dates when it adversely affected you.
- Although the HMRC summary of reasonable excuses and non-reasonable excuses, lists 'coma, major heart attack, stroke or other serious or life threatening illness' as being a reasonable excuse, these are not the only illnesses that would be acceptable. Accidents, viruses and other ailments may prevent the reasonable person from submitting tax returns on time.
- Do not be put off because the guidance from HMRC does not mention the illness from which you were suffering.
Back to the top
- HMRC guidance states that they will accept the illness or death of a close relative or a domestic partner as a reasonable excuse.
- You will have to show that you were aware of the need to submit the return and it was only the illness or bereavement that caused you to delay sending in the return. You will have to show that you gave the Return your attention as soon as possible.
- Be prepared to give details of the illness, including a copy of doctor's note or letter confirming the dates of the illness. Tell HMRC or the Tribunal how much of your time the matter took.
- In the case of bereavement be prepared to produce a death certificate as well as explain how much of your time was taken up with personal matters.
Back to the top
- It is possible that you posted the Return but that it did not arrive at the tax office.
- HMRC guidance suggests that fire or flood at the post office or prolonged industrial action within the post office will be acceptable reasons. There will be other acceptable excuses.
- If you posted the Return and have no explanation as to why it did not arrive, or it arrived late, ask the post office if there were any problems in the area at the time. Sometimes the local sorting office has some difficulties that do not receive lots of publicity but which affect some postal items.
- If at all possible produce evidence that you posted the Return - recorded or special delivery slips are useful. Alternatively this may be in the form of a post-book if your business keeps one.
- It may be that you recollect it being posted at a specific time and place or maybe by a certain person.
- Perhaps you can remember being with someone when the Return was posted.
- Think carefully and try to show how and when the Return was posted. Items are occasionally lost or delayed with no apparent reason.
- The Tribunal will take account of your evidence and that of HMRC. It will be decided if you have shown that on the balance of probabilities you prepared and posted the return.
Back to the top
- HMRC guidance states that they will accept loss of records through fire, flood or theft as an excuse.
- Perhaps your records were kept on computer and the computer crashed. It is likely that this will be accepted.
- You will have to produce evidence that the computer failure happened at the relevant time - an invoice from the computer engineer who repaired the machine will help.
- In addition you will need to show that you reconstructed the records from your paperwork as soon as was practicable.
- It would of course be preferable to keep back-up discs of everything, but not everyone does this.
Back to the top
- HMRC guidance states that it will not normally be acceptable to rely on this an excuse. It is their view that it is your responsibility to submit your Return on time.
- However there may be reasons why an agent failed to submit the return on time. This could include their illness, or indeed the death of a close relative or partner.
- You will have to produce evidence that it happened and that you had no notice of the event and could not submit the return on time yourself.
- Of course if you have to pay a penalty because your agent failed in their duty, it may be possible to claim the amount of the penalty from the agent.
Back to the top
- HMRC guidance states that this will not normally be accepted as an excuse.
- However the pressure of work may have occurred suddenly and be totally unexpected. Perhaps you were called abroad at the relevant time or your business partner died suddenly.
- Show HMRC and the Tribunal that the event or the pressure of work was not expected and that you had given some thought to your tax return. In addition you will have to show that as soon as possible you sorted the matter out.
- You have to show that you behaved as a reasonable person.
Back to the top
| Joanne - late submission penalty Joanne was late in sending in her 2010/11 tax return. Her tax liability for 2010/11 was £75. The penalty that Joanne pays is £100 even though the tax due was less than this. |
Back to the top
| Kofi - no payments on account - balancing payment Kofi had a tax liability for 2010/11 of £350. As this is less than £500 Kofi did not need to make any payments on account for 2011/12. When he sent in his 2011/12 tax return Kofi had a tax liability of £400 for the year. He will pay this amount in one instalment on 31 January 2013. |
Back to the top
| Robert 1 - working out payment amounts and dates Robert aged 48 completes a self-assessment return each year because he has an income from letting some land which is not taxed before he receives it. On 12 July 2011 he sends in his 2010/11 return. Robert's tax liability for 2010/11 is as follows: | Tax due | £2,800 | | | Paid: | | | | First instalment - 31 January 2011 | £1,000 | (based on half of previous year's tax) | | Second instalment - 31 July 2011 | £1,000 | (based on half of previous year's tax) | | Balancing payment - 31 January 2012 | £ 800 | | |
Back to the top
| Robert 2 - need to make payment on account Robert's tax liability is more than £1,000. PAYE and tax paid at source cover less than 80% of the total due. Robert will need to make payments on account for 2011/12 (the year to 5 April 2012). |
Back to the top
| Robert 3 - payments on account On 31 January 2012 Robert will also need to make a payment on account for the tax year 2011/12 (year ended 5 April 2012). His payment on account will be based on half of his 2010/11 tax liability. Robert will therefore need to pay £1,400 on 31 January 2012 (together with the balancing payment of £800 for 2010/11 we worked out in Robert 1) and £1,400 on 31 July 2012 . |
Back to the top
| Robert 4 - claiming to reduce payments on account If the land became vacant so that Robert's income for 2011/12 is likely to be much lower than that for 2010/11, he can claim to reduce his payments on account. Robert works out that he will only have a tax bill for 2011/12 of around £2,200. The reduction will be £600. He therefore claims to reduce each instalment of his 2011/12 payments on account by £300. |
Back to the top
| Robert 5 - over-reduction of payment on account - interest On 10 June 2011 the land is let again and Robert realises that he has reduced his payments on account by too much. He thinks he will have a tax bill for the year of nearer £2,500 and not £2,200. Robert writes to HMRC to let them know he will need to pay more tax on each instalment. He has already paid the 31 January instalment of £1,100 (half of £2,200) so he needs to pay a further £150 on that instalment and he will also need to pay £1,250 by 31 July 2011. He sends a cheque with his letter, which HMRC receives on 12 June 2011. The July instalment was not due when Robert notified them so there is no extra interest to pay but he will have to pay interest on the additional £150, which should have been paid with the first instalment on 31 January 2011. The interest will run from 1 February 2011 to 12 June 2011 - the date HMRC received payment of the £150. |
Back to the top
| Julia - late submission of tax return and surcharge Julia submitted her 2010/11 tax return on 4 February 2012. She did not pay any of the £600 balance of tax that was due on that date. Julia had not needed to make any payments on account. Julia finally paid the tax due on 1 April 2012. The following amounts will be added to Julia's self-assessment statement: Penalty on late submission of the 2010/11 tax return - £100 Interest on £600 from the due date of 31 January 2012 to 31 March 2012 Surcharge on tax unpaid at 28 February 2012 - £600 @ 5% - £30. |
Back to the top
