Tax returns: Six quirks of self-assessment from The Telegraph

Do I need to complete a form?

Around 11 million people have to submit self-assessment forms before the January 31 deadline.

You need to do one if you’re self-employed, a company director or a partner in a business.

If you’re employed but earn untaxed income outside of your regular employment you’ll need to do one too.

Higher-rate taxpayers claiming relief on pension contributions might also need to submit a return; and if you earn more than £50,000 and claim child benefit you need to fill out a form to pay some of it back.

HMRC say that just under five million returns are still outstanding.

If you’re one of those people who has yet to submit, here’s all the information you need to know to get it right.

What to watch out for:

PPI

If you were mis-sold payment protection insurance and have successfully claimed it back, the firm who sold it to you may be giving you interest of 8pc p.a which is designed to compensate you for not having the money you spent on the policy.

You have to pay tax on this interest and it should be included in your self-assessment form.

National Trust membership

Through gift aid, charities can claim a basic rate of tax on your donations. If you’re a higher-rate taxpayer, you can claim back the rest of the tax you have paid on charitable donations by including them on your self-assessment form.

Membership of the National Trust could mean you could claim more tax back (Alamy)

Donations include annual memberships of charities such as the National Trust and English Heritage, as well as entrance fees for attractions such as zoos.

Registration

If you didn’t do self-assessment last year, it takes 20 working days to register with HMRC. So if you haven’t done it already, you may be too late.

HMRC says you should register by October 5 following the end of the tax year you need to send a form for. But if you missed it, they won’t fine you – as long as you don’t miss the January 31 filing deadline.

Fines – and how to avoid them

Last year 890,000 people missed the deadline, and HMRC launched a consultation on scrapping the £100 fine for those who miss the date by “a day or two”.

As it stands this fine is still in place (provided you don’t have a good excuse – see below).

If you miss the filing deadline by less than three months, HMRC will fine you £100. After three months, they will fine you £10 every day for up to 90 days, to a maximum of £900.

After six months they will fine you five per cent of the tax outstanding on that date, or £300, if that’s greater.

After 12 months you will be fined another five per cent or £300, whichever is greater – unless they think you’re deliberately withholding information that would allow HMRC to assess the amount of tax you owe.

If that happens they can fine you anywhere up to 100 per cent of what they think you owe, with reductions for disclosures, payments and being helpful.

Excuses

If you know now that you won’t be able to pay on time, tell HMRC. They might give you more time to pay or let you pay your bills in instalments.

If you have a good reason for being unable to pay, like theft, bereavement, or illness, you might get a reprieve.

HMRC say they will also make special provision for victims of the December floods and storms.

How is the process going to change?

Last year George Osborne announced a series of proposed changes to self-assessment. None of these are implemented yet, but to give you an idea, here’s a timeline of how things will change.

April 2016 – Contractor expenses are being changed. Temporary workers employed by an intermediary company will no longer be able to claim tax relief on travel and subsistence.

2020 – The government plan to introduce a personal tax account for taxpayers so they can see their tax position online.

Some taxpayers have already been pushed into trialling this new system.

However, this would also mean businesses and individuals would have to file their returns quarterly instead of annually, which has been condemned by small business groups as potentially crippling.

Taxpayers with tax affairs that HMRC believe to be simple will also be sent an automatic bill from HMRC which would need to be challenged if wrong.