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Self assessment

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Self-assessment might be a good idea in theory but in practice there are a lot of things that can go wrong. The main one being that people don't actually do it!

If you do not have an accountant and are going the self-assessment route then you may well self yourself a few hundred pounds in accountancy fees but it is imperative that you are aware of the potential to run up significant fines with HMRC should you fail to adhere to their filing and payment deadlines.

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Self assessment

  1. 1. Penalties Imposed by HMRCHMRC will impose stiff financial penalties forboth late filing and late payment of tax returns.Those hit with a late filing penalty are generallyalso subject to a late payment penalty too!This can all add up to be very expensive!
  2. 2. If you file electronically (due 31stJanuary) and are just one-day late, youwill be liable for a penalty of £100!This applies even if you have alreadypaid the tax, or if you do not actuallyowe the revenue anything!The penalty is purely for late filing!
  3. 3. The £100 penalty is a flat fee thatapplies for the first three months.After those three months you will becharged £10 per day for 90 daysThis could cost you up to £900.
  4. 4. After six months HMRC will charge 5% ofoutstanding tax (minimum of £300)As the tax bill is probably not known HMRCwill perform a ‘determination’ and estimatewhat you may owe.At this point you will have at least £1300 infines to pay and possibly more depending onthe ‘determination’.
  5. 5. After 12 months there is another 5% (minimum£300) penalty of the outstanding tax bill.At this stage an individual will have added abare minimum of £1600 and in reality a lotmore.
  6. 6. The stated penalties are purely for the failure tosupply paperwork.Most individuals in this situation will also nothave actually paid their tax and so will be hitwith additional fines for non payment!
  7. 7. The first penalty for non-payment is 5% of theoutstanding tax if it is not paid within 30 days(tax is generally due on 31st January).
  8. 8. Once it gets to six months another 5% penalty ofthe unpaid tax is levied.All this time interest on the outstanding amountis also being added to the bill – interest ischarged on both the outstanding tax and theunpaid penalties.And don’t forget the charges for the non-filingtoo! Ouch! This is getting expensive!
  9. 9. After 12 months another 5% is added – againcalculated on the entire outstanding amount!After 12 months have passed and no tax hasbeen paid the question you are asking mightwell be;What happens if you can’t pay your tax bill?
  10. 10. HMRC put non-payers into one of twocategories;‘can’t pay’or‘won’t pay’
  11. 11. Can’t pay – it is likely that HMRC will be open tomaking an arrangement in the form of a paymentplan.Once you make an arrangement it is imperativethat you pay what you agreed.The second stipulation is that you must keepcurrent tax liabilities up to date – it isunacceptable to pay off arrears whilst continuingto build them up in the current tax year.
  12. 12. Won’t pay – if HMRC believe that you can paybut are refusing to liquidate assets they will takethe legal route.You will receive letters and phone calls, the casewill be passed to a debt collection agency, youwill receive CCJs and be taken to court.Ultimately the choice comes down to;pay, or, go to jail!
  13. 13. The only sensible thing to conclude from all ofthe above is to file your return and pay your billon time!If you have any questions on selfassessment call 01708 320 596 andspeak to one of our experts.
  14. 14. Holgate Court Accountants in Romford provideall the usual accounting services as well as;Solicitors accountsBookkeepingManagement accountsHolgate Court Accountants8 Holgate Court,4-10 Western Rd,Romford,RM1 3JSTEL: 01708 320596

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