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Personal finance: File tax return or face big hit

** APN ADVANCE FOR SUNDAY, APRIL 15--FILE **Chicago crime boss Al Capone, center, leaves a courtroom in Chicago  in the custody of U.S. marshals where he was facing tax evasion charges, in this file photo of Oct. 24, 1931.  Marshal duty these days includes Iraq, where deputies protected witnesses during the historic trial of Saddam Hussein and assisted the U.S. military in transferring the Iraqi dictator to local authorities for execution by hanging. (AP Photo, File)

Notorious gangster Al Capone (2nd left) was jailed for tax evasion. Picture: AP

** APN ADVANCE FOR SUNDAY, APRIL 15--FILE **Chicago crime boss Al Capone, center, leaves a courtroom in Chicago in the custody of U.S. marshals where he was facing tax evasion charges, in this file photo of Oct. 24, 1931. Marshal duty these days includes Iraq, where deputies protected witnesses during the historic trial of Saddam Hussein and assisted the U.S. military in transferring the Iraqi dictator to local authorities for execution by hanging. (AP Photo, File) Notorious gangster Al Capone (2nd left) was jailed for tax evasion. Picture: AP

  • by JEFF SALWAY
 

MISS your income tax return deadline and penalties will begin to kick in, warns Jeff Salway

Time is running out for Scots to file their tax returns or risk hefty fines, including thousands of families facing child benefit clawbacks.

The deadline for completing tax returns and any payments owed from the 2012-13 tax year is now less than three weeks away, on 31 January. And the date has a new significance this year for many Scots not previously in the self-assessment system but pulled into it for the first time by changes to child benefit.

But up to four million of the ten million people due to submit online tax returns have not yet done so, HM Revenue & Customs (HMRC) said yesterday, putting them at risk of late payment penalties.

Around 1.2 million families are affected by changes to child benefit that took effect a year ago, including more than 100,000 in Scotland.

Under the new rules, households where at least one earner has income above £50,000 lose some or all of their child benefit. The benefit paid out to those households is clawed back through the high income child benefit charge (HICBC) at a rate of 1 per cent for each £100 of income above £50,000, being removed entirely at £60,000.

Around 1.2 million households are affected, including some 700,000 who lose all their entitlement and more than 100,000 households north of the Border.

Yet HMRC warned that nearly 120,000 child benefit recipients who need to sign up for self-assessment have not yet done so, more than three months after the registration deadline.

It also estimates that more than 400,000 families have opted not to receive the benefit rather than have to go through self-assessment. Another 325,000 have had to register for self-assessment for the first time as a result of continuing to receive child benefit.

Parents who opted out before 7 January don’t have to take action, but those that requested after that date to stop receiving the benefit may still need to have some payments clawed back.

Evan Duffus, a financial planner at Acumen Financial Planning, said: “With thousands more taxpayers falling within the self-assessment system than ever before, more people are struggling with which forms should be completed and what income should be declared.”

Anyone filing their returns online needs an activation code, for which they must register by 21 January.

The stiff late fines penalty system adds to the jeopardy of self-assessment. Those failing to submit a return by the end of January deadline will automatically be fined £100. If the return still isn’t filed by 1 May HMRC adds £10 a day to the penalty for the following three months. If after six months the returns still aren’t submitted the revenue adds another penalty of whichever is higher of £300 or 5 per cent of the tax due. The one-year penalty for not filing is another fine of £300 or 5 per cent of the tax due, whichever is highest, taking the potential penalties above the £1,600 even if no tax is owed.

Duffus urges anyone who is unsure whether they need to submit a tax return – due to child benefit changes or any other reason – to check with HMRC rather than risk fines.

“You are responsible for doing so and charges can be levied if you fail to inform HMRC that a return should have been carried out,” he said.

Completing your self-assessment returns is easier if records are kept and maintained, including income, expenses, benefits, savings interest, dividends, property income and any capital gains.

Once the return has been completed, it’s vital to then pay the tax due by the “payment on account” date, which is 31 January during the tax year and 31 July after the end of the tax year. Any balancing payments have to be made by the following 31 January.

“Failing to pay your tax liability on time will result in further penalties depending on the length of the delay, typically at a rate of 5 per cent of the unpaid tax and late payment interest at a rate of 3 per cent,” Duffus warned.

• For more information - http://www.hmrc.gov.uk/sa/

 

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