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14.01.2018

January Blues and Tax Returns

For UK consumers, it’s that time of year again.

First there is what is traditionally known as Blue Monday, the most depressing day of the year (this year it is the 15th of January) and amongst other things, signifies when the first, post-festive period, credit card bills begin dropping through mail boxes.

Second, for over 11 million self-employed workers, there is then the second most depressing day of the year, the 31s of January. This is the day when all self-assessment tax returns must be made to HMRC.  It is also the date that first payments on account and balancing payments must be made for any outstanding bills from previous years.

Credit card payments no longer permitted

What makes this year different, however, is for millions who traditionally put their tax bills onto credit cards, with a view to spreading the costs over the year, this year HMRC have said they will not accept payments by people wishing to pay by personal credit card.

This rule change follows on from a European directive that was issued to EU Governments and implemented by the UK Government on the 13th January, stopping UK businesses and government departments charging fees to those who pay by credit card.

In response to that rule change, HMRC, however, have said they will now stop accepting any payments where personal credit cards are used, but will still accept payments if they are made using a debit or a corporate credit card.

The January Rush

However, each year, the 31st of January is a worrying time for many, and in the run up to the deadline, desperation will set in as the search for invoices, receipts and bank statements begins.

In 2016, for example, 43% of all tax returns were received by HMRC in January, despite the fact people had been able to submit their returns from the 6th April 2015. Of those 4.45 million returns, just under 20% (823,000) were received between the 30th and the 31st of January 2016.

And there is good reason for the panic. Failure to submit your return on time can come at a heavy price.

Even if there is no tax due and you fail to submit your return on time, there is an initial £100 fixed penalty. After 3 months, this increases to £10 per day, up to a maximum of £900. Then after 6 months, a further penalty of 5% of all the tax due can be applied or a charge of £300, whichever is the greater. At 12 months, if you still have not submitted your return, this penalty is reapplied.

That is just for failing to submit your return.

If you are late in paying your bill, then after 30 days you can have an additional 5 % of the amount owed, added onto your bill. This penalty is then reapplied after 6 months and then again after 12 months.

What to do if you are due to submit a return

If you are due to submit a return for the tax year 2016-17, the most important thing you can do is submit it by the 31st of January 2018. Even if you do not believe you will be able to pay your bill by that date, submitting your return will at least prevent any late filing charges and will, therefore minimise the amount you must pay.

However, as the 31st of October deadline has passed for paper returns, any return that must be submitted, must be submitted online.  You, therefore, need to enrol online to create a Government Gateway Account. This can be done here. To do this you will also need your Unique Taxpayer Reference (UTR), which is different from your national insurance number. A UTR is a ten-digit number, sometimes with a letter “K” at the end and normally is found on any payment demands from HMRC or reminders to submit a return.

Even if you don’t believe you will be able to pay any demand for payment on time, any attempt to enter a repayment plan with HMRC will require you to first submit your return, even if late, as otherwise, HMRC will not be able to determine how much you owe.

What if you cannot pay your bill on time?

If you are not able to pay your bill by the 31st of January, then after 30 days a 5% surcharge of the amount you owe will be applied to your account.

It is, therefore, important you seek advice at this point. It may be possible to seek a repayment plan with HMRC or there may be another formal solution you can use for dealing with your debts. In Scotland, for example, the Debt Arrangement Scheme (DAS), freezes all interest, charges, fees, and penalties, which means even HMRC are not able to apply charges for late payments, although it will be necessary to include all your debts into the arrangement. The, DAS, however, does not stop them applying fees for late filings.

Although such a remedy is not available in the rest of the UK, there are other possible solutions such as Individual voluntary arrangements, which can include debts that are owed to HMRC.

The important point about tax debts owed to the Government is not to ignore them, particularly if you are going to remain self employed in coming financial years, as they will only continue to accrue.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.