File your tax return now so you don't count the cost later

Although the current tax return system will be changing as a result of the Government's Making Tax Digital initiative, if you file by paper you still need to meet the 31 October 2016 deadline for the year ended 5 April 2016.

As part of its Making Tax Digital initiative, HM Revenue & Customs (HMRC) is currently consulting businesses of all sizes about the future of tax collection, including plans to replace the annual tax return with quarterly reporting within the next five years and a new points-based penalty system are debated.

Until it is known what changes will be made to the Making Tax Digital initiative as a result of the consultations, the current penalties remain the same.

A late tax return is subject to the following penalty regime:

An initial £100 penalty applies even if there is less than £100 tax to pay or the tax due is paid on time
After three months, additional daily penalties of £10 per day – up to a maximum of £900
After six months, a further penalty of 5% of the tax due or £300 – whichever is greater
After 12 months, another 5% of the tax due or £300 – whichever is greater. In more serious cases, the penalty after 12 months can be up to 100% of the tax due

Each of these penalties is in addition to one another means a tax return filed a year late could face penalties of at least £1,600 – and this could escalate depending on the level of tax due.

You could also be liable for interest and late payment penalties on top if you pay any tax due late. Tax payments are normally due on 31 January and sometimes the following 31 July, depending on the level of tax liability.

Although more than 80% of taxpayers choose to file their tax returns online, which allows them to file their 2016 tax returns by 31 January 2017, please bear in mind that it clashes with the festive period.

Some taxpayers may leave their tax returns until the New Year, but why not get yours done ahead of the holidays? Filing in advance means you can eat, drink and be merry over Christmas, without having to stress and worry about a looming tax return deadline.

By preparing your records in advance for your tax return, you will equip your accountant with plenty of time to check for any tax planning opportunities you and your business may be eligible to receive; taking full advantage of any tax reliefs and allowances.

Once your tax return is ready, your tax liability can be calculated. Your income tax liability for your 2016 tax return is due by 31 January 2017, even if you file your tax return early. Therefore, the sooner you prepare your return, the sooner you can start looking at your finances and deciding on what you need to put aside to cover your tax bill.

Help is at hand

As delaying your financial affairs can be severe but your time may be tight because you are busy concentrating on the day-to-day running of your business, why not let the experts at your local TaxAssist Accountants look after your tax affairs and responsibilities.

TaxAssist Accountants is able to provide you with the following services:

Register you with HMRC for Self-Assessment and any other area of tax applicable, such as VAT or registration as an Employer
Prepare your tax return for you and consider any tax planning opportunities
Calculate your tax liability and advise you of the amount and due date of any payments to be made
Review HMRC correspondence and liaise with HMRC on your behalf. This can be really useful if they are issuing you incorrect tax codes or are taking a long time to issue you your tax refund

Last updated: 27th September 2016