It is important to keep your personal tax affairs in order so that you avoid incurring any Tax Return late filing penalties. The cut-off dates are shown in the calendar, but the current penalties are:

Late filingLate paymentPenalty
Miss filing deadline£100
30 days late5% of tax due
3 months lateDaily penalty £10 per day for up to 90 days (max £900)
6 months late5% of tax due or £300, if greater*
6 months late5% of tax outstanding at that date
12 months late5% or £300 if greater*, unless the
taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due.
12 months late5% of tax outstanding at that date
12 months & taxpayer deliberately withholds informationBased on behaviour:
deliberate and concealed withholding 100% of tax due, or £300 if greater.
deliberate but not concealed 70% of tax due, or £300 if greater.
Reductions apply for prompted and unprompted disclosures and telling, giving and helping.

The timetable for making tax payments is relatively straightforward for the self-employed:

  • 31 January in the tax year, first payment on account
  • 31 July after the tax year, second payment on account
  • 31 January after the tax year, balancing payment.

Again, a system of interest and penalties applies. For example, if any balance of tax due for 2017/18 is not paid within 30 days after 31 January 2019, HMRC will add a 5% late payment penalty as well as the interest that will be charged from 1 February 2019.

A further 5% penalty will be added to any 2017/18 tax unpaid after 31 July 2019, with a final 5% penalty added to any 2017/18 tax still unpaid after 31 January 2020. Interest is also charged on outstanding penalties, as well as on unpaid tax and NICs.

If there are cash flow issues, HMRC might be persuaded to accept a spreading of your next business tax payment — you will have to pay interest at the HMRC rate, but keep to the agreed schedule and late payment penalties will be waived. Arrangements need to be put in place before the due date for paying the tax, so talk to us in good time if you wish to apply.

Payments on account – Payments on account are normally equal to 50% of the previous year’s net liability. A claim can be made to reduce your payments on account, if appropriate, although interest will be charged if your actual liability is more than the reduced amount paid on account. There is no equivalent mechanism to make increased payments on account when the year’s tax will be higher, so you should ensure that you build a reserve of money to pay the balance of tax due.

Don’t wait until it’s too late if you have difficulties! Please tell us in good time about any issues facing your business, as we may be able to offer solutions.

Payments on account are not due where the relevant amount is less than £1,000 or if more than 80% of the total tax liability is met by income tax deducted at source. In these cases, the balance of tax due for the year, including capital gains tax, is payable on the 31 January following the end of the tax year.

Case Study: George is self-employed. His accounts are made up to 31 August each year. When we prepare the 2018 Return we will be including his profit for the year ended 31 August 2017, and that is the profit which will be taxed for 2017/18. George’s payments on account for 2018/19 will automatically be based on the 2017/18 liability. Providing we know that George’s profits for the year to 31 August 2018 are significantly less than the previous year, we can examine the figures, perhaps even prepare the annual accounts and, taking into account any other sources of taxable income, make a claim to reduce George’s 2018/19 payments on account, easing his cash flow by reducing the tax payments due in January and July 2019.

This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.

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