A person’s Self Assessment is a vital document to ensure they are charged the correct amount of income tax. Individuals and businesses need to complete the form if they have income other than from wages, pensions and savings.
The deadline to file a Self Assessment tax return is January 31, with an automatic penalty of £100 for those who miss the deadline, as well as other costs for late payment.
An article published on the Government website on January 3 said some 5.7 million Britons still needed to file their Self Assessment.
Who has to send a Self Assessment tax return?
A person will need to file a tax return if during the last tax year, from April 6, 2022 to April 5, 2023, they were:
- Self-employed as a ‘sole trader’ and earned more than £1,000 (before deductions for tax relief)
- A partner in a business partnership
- Earned £100,000 or more.
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An individual may also need to file a Self Assessment if they have any untaxed income. This could include:
- Some COVID-19 grant or support payments
- Income from renting out a property
- Tips and commission
- Income from savings, investments and dividends
- Foreign income.
Another cost for those who do not file their tax return on time is a late payment interest rate. This is set at the base interest rate, plus 2.5 percent, meaning the rate is now six percent.
For example, a taxpayer who owes £30,000 on January 31, 2023, but who does not pay the tax and late payment penalty until June 1, 2023, would find their total bill had increased by just over £2,100.
With the rise in the base interest rate, they would be paying just under £300 more interest to HMRC than the same tax debt paid late in 2022 would have cost them.
Dawn Register, head of tax dispute resolution at accountancy firm BDO, said: “Taxpayers who file and pay late this year may be in for a shock.
“In addition to late filing penalties and late payment penalties, which can quickly add up, the interest rate applied by HMRC for late payment is at its highest level in almost a decade and a half.”