It is a mistake to believe that a tax return is not due just because HMRC have not requested one. The onus is on the taxpayer to act, not for HMRC to initiate.

The deadline for filing a tax return is 31 January in respect of income and gains received in the 2017-18 tax year. If you have not done so yet, you need to act fast to avoid penalties and interest for late filing and late payment.

But who needs to file a return? What happens if you don’t and how could you be due a refund?

What is self-assessment?

The principle behind self-assessment is that it puts the onus on every taxpayer to know what they owe in tax or are eligible to claim relief on. It also works on the assumption that whatever happened in one year will be repeated in the future.

If everyone was a tax expert and nothing ever changed in their lives this system would work well. In reality, few taxpayers fully understand tax law and many taxpayers face changes in their circumstances from year to year.

What is the timetable for tax returns and payment?

Unfortunately ignorance of tax law is no defence and late payment or failure to file a return, when one is due, will result in fines and penalties being applied by HMRC or relief being lost.

The tax return timetable is as follows:

Tax Year 6 April – 5 April.

Deadline for filing return and paying tax due on previous year 31 January of following year (9 months later) – 31 January (so those filing for the tax year ending 5 April 2018 have a deadline of 31 January)

Deadline for payment on account for current year – 31 July.

Who needs to file a tax return?

Sometimes HMRC writes to a taxpayer and tell them they no longer need to complete a self-assessment return. This may sound like good news. However, HMRC does not know personal circumstances and so this helpful advice should always be sense checked, rather than taken at face value.

The helpful letter from HMRC will not negate the imposition of fines or penalties for late filing/paying of tax due. Failing to claim reliefs due means they are lost. HMRC has no responsibility to proactively make taxpayers aware of reliefs and allowances unclaimed. Claims for refunds of tax overpaid can generally only be made over a four year period, so sense checking one’s tax code, and reviewing whether tax has been overpaid or underpaid, is advisable.

When might I be able to claim a tax refund?

You might be able to claim a tax refund if:

  • Income has reduced during the tax year;
  • You are due to start maternity leave;
  • Your working hours are reduced;
  • You have lower investment income than earlier years;
  • Pension contributions have been made from a bank account by the relief at source method;
  • You have completed the payment of a student loan;
  • You have one off investment losses;
  • You have one off pension investments or charitable gifts;
  • You have made a withdrawal of pension funds in excess of 25% tax free cash;
  • You have a void period when letting a property;
  • You have ceased to be self employed;
  • You have claimed the marriage allowance;
  • You have changed jobs;
  • You have started to receive the state pension.

Why might I owe more tax?

You may owe more tax if you have:

  • Increased earnings;
  • One off gains from investments;
  • Reduced regular pension contributions;
  • Withdrawn more than 25% tax free from a pension;
  • Paid more into your pension than the annual allowance;
  • Receiving more interest than the tax free allowance;
  • Claiming child benefit when income exceeds £60,000, or
  • Have more than one employment, self employment.

Fines and penalties

Missing the deadline attracts an automatic penalty of £100. This increases over time and if payment is also late. For example, filing and paying a £100 tax bill 6 months late would attract total penalties and interest of £816.

Make it easier

To make the process less painful and hurried it is a good idea to save every notification of income or gains/losses and communications from pension providers, investments, employers and HMRC in a file which can then be reviewed before the 30 June of the tax year following.

Setting an annual review date gives time to consider whether any payment on account needs to be made by 31 July, to gather information on outstanding income, gains, losses and reliefs so that advice can be sought and action taken well ahead of the 31 January deadline.

Where income has fallen, it may be possible to reduce any payment on account required by 31 July, thus assisting cash flow. However underpaying tax at this stage can also incur interest and penalties, so good record keeping is essential.

Making a New Year’s Resolution to review your tax position before 5 April also gives more time to plan tax savings for the current year.

Kay Ingram is director of public policy at LEBC

This article first appeared on What Investment on 19 December 2018