Tax deadline set to catch out unwary

Published on Saturday 3 October 2009 13:42

MORE than nine million people will need to complete a tax return this year, a greater number than usual due to the downturn.

Some have been forced to take up extra part-time work to make ends meet. Others have had to sell off holiday homes or dispose of other assets. Workers who've been made redundant may have started their own businesses.

Whatever the change to their earning ability, many are unaware that if they have generated extra income, or given up PAYE to become self-employed, and haven't yet filled in a tax return for last year, they will have to confess all to the taxman by tomorrow or risk a 100 penalty.

This is the deadline for individuals to notify HMRC of the need to complete a tax return. It's a cut-off date that is expected to take many by surprise.

The credit crunch has caused a growing number of people to seek additional income and many affected will be receiving untaxed income or gains which they haven't previously received.

If so, they may well have triggered the need to complete a tax return for the last financial year, ending 5 April 2009.

Thousands of individuals, including anyone who receives taxable income from more than one source which is paid gross, or who is a higher-rate taxpayer, may be affected.

In addition, those who have not completed a tax return in the past and have therefore not been issued with a notice to file a return are required to own up to HMRC.

Perhaps, due to the downturn, they have rented out a property or even a room in their home. Maybe they have had to dispose of shares. They may even have reached retirement age and are receiving a state pension but have a company pension and a part-time job.

If anyone does fall into any of these categories, or thinks they may do, they will need to ensure they notify HM Revenue & Customs (HMRC) immediately. Having notified the taxman, individuals who have received untaxed income for the last tax year will be required to complete a paper tax return by 31 October 2009 or risk another 100 fine.

Alternatively they can complete an electronic return, which gives them a bit more leeway, provided they file online by the final deadline of 31 January 2010.

The earlier paper deadline of October was introduced last year to encourage more people to switch to online filing.

However, online filing isn't for everyone. Some may wish to submit a paper return if they feel less confident using a computer or do not want to go through the registration process, which includes waiting for an activation PIN via the post and which can take up to seven days to arrive.

There are also a few cases where online returns cannot be made. In these cases the deadline for the paper return to reach HMRC is 31 January. This applies to individuals where the relevant supplementary pages are not available online.

The due date for the payment of any tax liability is still 31 January following the end of the tax year. So for this year it will be 31 January 2010. Otherwise, there's another 100 penalty and the prospect of further interest being charged on late payments.

For those thinking about not declaring their additional income, it is worth bearing in mind that HMRC has launched a new online tool to encourage people to report tax cheats.

Anyone who has any information on an individual or business avoiding tax payments can now report it via its website – www.hmrc.gov.uk/tax-evasion – in complete confidence.

This follows the success of its Tax Evasion Helpline established four years ago, which has enabled HMRC to recover more than 42 million of unpaid taxes from fraudsters.

Taxes and tax returns can be a complex issue and are likely to become more complicated.

As our politicians meet for their party conferences to discuss and decide upon strategies ahead of next year's general election, taxes have featured high on the agenda as they attempt to repair the nation's finances.

The Liberal Democrats have proposed a levy on homeowners with properties worth more than 1m.

Labour has already announced raising the top rate of income tax from 40 to 50 per cent next April, and removing the tax break on childcare vouchers.

And the Conservatives are threatening to remove tax credits from middle and high-earning families.

For many individuals the current tax system is complicated enough, with many struggling to keep up to speed with legislative changes and ever- shifting tax deadlines.

Andrew Addie is director of taxes, Grant Thornton Scotland

Online returns are child's play for new dad Ian

Teresa Hunter

NEW dad Ian Fraser is delighted baby Catherine has begun to settle in the evenings and is showing signs of sleeping through the night. Otherwise getting his tax return completed was sure to be a trial of wills.

The Edinburgh solicitor said: "If I can get my evenings back again, then I should be OK. But otherwise, completing my tax form will be a challenge."

But Fraser, 36, has plenty of experience, having filled in a tax return for six years, since he bought a second property to let.

He said: "I was living in Aberdeen at the time, and a house came up for sale in the road I was living in. I knew the rental yields were high, so I thought I might buy it and try letting."

He began with a paper tax return and then switched to online. "At first I found online filing very frustrating, but I am used to it now and prefer it," he said.

But filling in his return is still something Fraser finds stressful.

"Doing your tax return is one of those things everyone hates," he said. "It has to be done by the end of January, but I begin a few days after Christmas.

"If you leave it too late you can be sure the HMRC website will crash, and you won't get filed in time."