Don't let 31 October tax deadline become a Halloween horror

26 October 2016

Karen Clark

For those who file a paper tax return, the HMRC deadline for submission for the year ended 5 April 2016 is midnight on 31 October. This means any paper returns filed to HMRC after that date will incur a penalty of £100 and more if the return is filed more than three months after the due date - even if no tax is actually due.

What if you miss the 31 October deadline?

All is not lost if you fail to send in your paper tax return by 31 October, but you will need to register with HMRC for online filing which will then be due by 31 January 2017 for 2015/16 tax period. It does take HMRC a few weeks to set up an online account, so allow plenty of time to ensure you can make the deadline.

Shortcomings in HMRC’s online service

However, it is not always possible to use HMRC's online service and some types of income and taxpayers, such as partnerships, those claiming non-dom status, and certain foreign income and gains, cannot submit online. Therefore, if you miss the paper return deadline and cannot use HMRC's online filing service, you would need to buy proprietary tax software that can cater for your specific circumstances or pay a tax adviser who has their own software.

Do you need to self-assess?

If HMRC has sent you a tax return to complete, you have to do so unless you agree with HMRC that you should be taken out of self-assessment because your only income is a salary or pension taxed at source. But even if HMRC do not send you a tax return to complete, you have an obligation to advise them if you need to file a tax return. That is why it is called self-assessment - you need to assess whether you need to file a tax return or not. Strictly speaking you should notified HMRC of your requirement to file by 5 October 2016 to give HMRC time to send you a tax return to complete. While technically HMRC can charge a penalty for failure to notify chargeability, this is rarely levied where they are notified soon after the deadline and voluntarily by the taxpayer.

No income? You may still need to file a return

It is not just those with high incomes or the self-employed who need to file a tax return, which can make it difficult to assess whether you need to submit or not. So if you’re a company director even if you earn no remuneration as a director; have rental income even if making a loss after deduction of expenses; or offer accommodation via a website, such as Airbnb (unless rent-a-room relief applies) you will need to file a tax return.

The gig economy

Also, if you have untaxed income from any source, including eBay sales (other than a one-off sale), casual freelance earnings or other income via the sharing economy, such as renting out a driveway, providing dining experiences or sharing car journeys in return for payment, then self-assessment is required.

While HMRC did announce in the Budget 2016 a £1,000 tax free allowance for earnings from sales of goods or services from sites, such as eBay, and a further £1,000 for income from property, such as renting a drive, loft or garage storage, this only applies from April 2017 so even small amounts of income for 2015/16 need to be declared.

Halloween horror

HMRC is using increasingly sophisticated methods of finding such income sources so, to avoid a nasty fright this Halloween, make sure you advise HMRC of all sources of income and gains, and file your tax return on time.

For more information please get in touch with Karen Clark, or your usual RSM contact.