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An
Introduction to Self Assessment
It is a fundamental part of the self-assessment system that responsibility
lies with you, the taxpayer, to file returns and pay the right amount of tax,
at the right time - you must not wait for the Inland Revenue to ask.
Tax
Returns
Tax returns covering income for the year ending 5 April 2001 will be issued
on or after 6 April 2001, and will consist of a main tax form and backing
schedules. Your tax office will send out what they think are the relevant
schedules. If you need other schedules you will have to ask for them. The
completed full return has to be submitted to the Inland Revenue by 31 January
2002 (the filing date).
If you don't want to work out your own tax bill, you must send the tax return
in by 30 September 2001. However, you should note that your return must be
completed as far as the total income on which tax has to be paid. Figures
must be given for every item, even if only estimates. It is not possible to
enter question marks or leave the tax inspector to decide whether an item
is taxable or not. The only section that can be left for the tax office to
complete is the actual calculation of the tax due on your total income.
If you have taxable income or capital gains for 2000/01 and have not received
a tax return, you must advise your tax office by 5 October 2001 at the latest.
There are automatic penalties for late filing of tax returns. Failure to submit
the tax return by 31 January incurs a £100 penalty. If it has still not been
returned six months later, a further £100 will be charged. However, the penalties
charged cannot exceed the amount of tax due. In the most serious cases, there
are provisions for penalties of up to £60 a day.
Amendments,
investigations, and record keeping
You have one year from the filing date to make any amendments to the return.
The Inland Revenue may correct obvious errors or mistakes within nine months
of receipt of the return.
Within a period of one year from the date the tax return was due to be submitted
(or when it actually was submitted, if later), the Inland Revenue will have
a right to make enquiries to check that the tax return has been correctly
completed. No reason for the enquiry need be given.
All records relating to the return should be kept during this one year period.
If trading or rental income is involved, all records should be kept for a
further four years.
Determinations
If a return is not submitted by the due date, the Inland Revenue can, within
five years of the filing date, make an estimate to the best of its information
and belief of the amount of tax due. This amount of tax will be payable without
appeal, but will automatically be superseded when the return and self-assessment
are sent in.
Payment
of tax
Payments on account of income tax (and class 4 national insurance contributions)
for a particular tax year will be due on 31 January in the tax year and 31
July following the end of the tax year. These payments will be based on one
half of the total income tax liability (less any tax deducted at source) for
the previous tax year. You have the right to reduce payments on account if
you believe that the income tax for the current year will be lower than that
for the previous year. However, you may be charged interest if the reduction
is more than it should be. Payments on account will not be required where
each payment works out less than £250.
Example
|
Tax
Year
|
Final
Liability
|
Payments
on account
|
Balance
due
|
|
1999/00
|
£6,400
|
£5,500
|
£900
|
|
2000/01
|
£7,200
|
£6,400
|
£800
|
|
2001/02
|
£7,800
|
£7,200
|
£600
|
| Payment Date | Amount due | ||
| On account | Balance | Total | |
| 31 January 2001 | £3,200 | £900 | £4,100 |
| 31 July 2001 | £3,200 | - | £3,200 |
| 31 January 2002 | £3,600 | £800 | £4,400 |
| 31 July 2002 | £3,600 | - | £3,600 |
| 31 January 2003 | £3,900 | £600 | £4,500 |
Surcharges
and Interest
An automatic surcharge of 5% will be levied on any 2000/01 tax outstanding
at 28 February 2002, and a further surcharge of 5% will apply to any tax still
outstanding at 31 July 2002. There is a right of appeal against the surcharge
on the grounds of reasonable excuse.
In addition, interest will run on tax (and surcharges and penalties) paid
late, from the due date of payment to the actual payment. The Inland Revenue
will pay interest on amounts overpaid, from the date of payment (or the due
date if later) to the date of repayment.
Self
assessment for employees
For employees, self-assessment is not too drastic. The PAYE system means most
employees should pay the correct amount of tax at source. An employee with
relatively straightforward tax affairs is unlikely to be asked to complete
a tax return.
Tax
Codes
The main cause of under or over payments of PAYE is actual benefits in kind
being different from the estimates included in the tax code. If there are
under payments of tax, they may be collected by direct demand or, if modest,
carried forward as an adjustment to their tax code for the next tax year,
but one. Self assessment allows up to £1,000 to be carried forward in this
way, provided the Inland Revenue is given all the relevant details by 30 September
following the end of the tax year.
Information
deadlines
So that employees can complete their tax returns properly, information deadlines
are imposed on employers:
Table of key dates
30 September
2000
- tax return for 1999/00 to be submitted if you don't want to work out
your own tax or if you want a PAYE underpayment of less than £1,000 collected
via your 2001/02 PAYE code.
31 January
2001
- tax
return for 1999/00 to be submitted with self-assessment.
- payment
of balance of income tax for 1999/00
- payment
of capital gains tax for 1999/00
- first
payments on account of 2000/01 income tax (normally half the total 1999/00
liability, adjusted for tax deducted at source).
31 July
2001
- second payment on account of 2000/01 income tax
30 September
2001
- tax return for 2001/00 to be submitted if you don't want to work out
your own tax or if you want a PAYE underpayment of less than £1,000 collected
via your 2002/03 PAYE code.
31 January
2001
- tax return for 2000/01 to be submitted with self assessment
-
payment of balance of income tax for 2000/01
-
payment of capital gains tax for 2000/01
-
first payment on account of 2001/02 income tax (normally half the total 2000/01
liability, adjusted for tax deducted at source).
31 July
2002
- second payment on account of 2000/01 income tax
… and so on.
Please contact us if you would like help with your self-assessment returns.
