Handling self-assessment taxes can be a real challenge, especially if you are relatively new to the world of HMRC and self-employment.
Filing your taxes after the required date could see you subject to late penalty charges and, in some cases, more serious consequences and penalties.
So, below, we have put together information on all you need to know about avoiding late penalty charges, including tips for ensuring your self-assessment taxes are registered and paid well ahead of time.
What Are Self-Assessment Taxes?
Self-assessment is an annual tax system where individuals who are deemed to be self-employed return a record of their taxes to HMRC. The process involves filing a form which details how much income was earned during the year and what deductions were made from this income. This information is then used by HMRC to calculate the amount of tax owed.
The main difference between self-assessment and PAYE (Pay As You Earn) is that self-assessment does not entail employers or employees being involved in the calculation of the individual’s tax liability. Instead, it is up to the individual to file a self-assessment tax return on their own behalf.
Self-assessment taxes are usually due at the end of January each year, in relation to tax owed for the previous tax year. This means that self-employed people are typically only required to make payments once a year, although it is possible to make monthly or weekly payments towards a tax bill if you prefer this.
When Is My Tax Due?
HMRC states that the deadline for paying self-assessment taxes for the previous tax year is usually 31st January each year.
However, there are other deadlines to be aware of. So, for example, in the case of the tax year that started on 6th April 2021 and ended on 5th April 2022, the deadline to register for self-assessment – for those who are self-employed or a sole trader, not self-employed, or registering a partner or partnership – would be 5th October 2022.
The deadline for a paper tax return, meanwhile, would be midnight on 31st October 2022, while the deadline for an online tax return would be midnight on 31st January 2023, which is also when the individual must pay the tax they owe.
Late Penalties And Other Consequences Of Not Paying On Time
If you need to file and pay a self-assessment tax return and you fail to do so by the deadline, you can expect to be hit with a penalty.
The standard late filing penalty is £100 for tax returns that are up to three months late, and you can expect this penalty to increase if you still haven’t filed and paid your tax return within that three-month window. You will also be charged interest on late payments.
What Should I Do To Avoid Late Penalties?
There are several things that you can do to avoid late penalties. Firstly, you should always keep track of all your expenses. This includes both personal and business-related costs. You should also ensure that you file your self-assessment tax returns on time – and working with a skilled and reliable accountant will help you make sure of exactly that.
It is important that you understand how self-assessment works and what you need to do to avoid late penalties and other consequences of failing to pay your taxes on time.
By sticking to the relevant rules and deadlines, you can help ensure the submission of your self-assessment tax return doesn’t have to be the stressful process it might initially seem.
For more advice, why not speak to a tax return accountant in Ipswich here at ST Accountancy, so that we can help ensure everything is in order in how you handle your taxes? You can also speak to us about other services including payroll services in Suffolk and business advice.