You have the best of intentions. You are not going to leave your tax return to the last minute again this year. Slowly, the months tick by. ‘I’ll look at it tomorrow,’ you tell yourself. All of a sudden you find yourself amid the Christmas planning rush. Then you get busy in January and do not get a chance to get the information together. Now the deadline for submitting your return has passed and your tax return is late. Sound familiar?

So, what do you do now?

First, do not panic. Second, do not bury your head in the sand. It is better to get up to date as soon as you can, rather than keep putting it off.

If you have an accountant, contact them, put up your hand and confess to your procrastination. Tell them that you want to put your tax affairs in order and ask them what information they will need from you to get your return to HMRC in the most expedient manner.

If you do not have an accountant, and do not want to appoint one, you will need to roll up your sleeves and wade through those chambers statements, your bank statements and credit card statements to put together your Income and Expenditure Statement and all the other pieces of information to put on your tax return.

Do not forget to include any gift aid payments or pension contributions as they will attract tax relief. Also, do not overlook any other sources of income such as dividends, bank interest, rental of income of your holiday flat in Margate and any overseas income. HMRC will know about these and you do not want them to be the ones to remind you that you have not included them on your tax return.

If you do not have an accountant, but want one, ask your colleagues whether they have anyone they would recommend. Everyone has a different experience, even with the same firm. Ring around and speak to a couple of firms. Find the practice that best suits you – not all accoutants are the same. The cheapest may not always be the best fit for you. Make sure that whoever you appoint has experience of dealing with barristers; you are a special breed for tax purposes.

Now that I am late, what penalties am I facing?

Well, this depends on how late you are with your tax return:

  • If you submit within three months of the deadline date, then the late filing penalty is a fixed £100.
  • However, once it is more than three months late you can add a £10 a day penalty for up to 90 days to a max £900.
  • If you have been very tardy in pulling it all together and it is more than six months late, then add 5% of the tax due or £300 if greater, to your running total.
  • Once it is over 12 months late, add yet another 5% of the tax due or £300 if greater.
  • However, if you are held by HMRC to be deliberately withholding information that would enable HMRC to assess the tax due, then HMRC can charge up to 100% of the tax due, although there will be reductions for unprompted disclosure and for helping HMRC assess your tax.
  • Penalties may be reduced if you have a reasonable excuse as to why your tax return was late.

What if I have not paid the tax due either?

This also will depend on when you finally pay the outstanding liability:

  • If paid within 30 days of its due date, there will be some interest to pay. This will be calculated using HMRC’s prevailing rate. The interest will continue to accumulate until the tax is finally settled.
  • Once it is over 30 days late, in addition to the interest, you will have a 5% surcharge of the outstanding tax at that date.
  • Once it is six months late, another surcharge of 5% of the tax outstanding at that date will become due.
  • Once it is 12 months late, there will be another surcharge of 5% of the tax outstanding at that date.

Getting ahead

So, I can hear your renewed promise... I will not leave this to the last minute again. To help firm your resolve, here’s a reminder of the advantages to completing your return early:

  • First, peace of mind knowing your return is in – imagine a Christmas without that nagging thought at the back of your mind.
  • Second, you will know how much tax you will have to pay by 31 January and be able to get your finances in order.
  • Third, if you have found your dream house and you are thinking of moving house or are just considering remortgaging your existing property, then you will need the latest accounts and tax return for your mortgage broker and mortgage application. It will be much easier and quicker to deal with this if your latest return is already done.
  • Finally, knowing what the latest position is will give you more scope for planning, particularly with regards to pension contributions. If you do have an accountant, the earlier you get the information in to them, the more time they will have to review your accounts and tax return in order to identify any planning opportunities.

What can you do to make it easier?

With Making Tax Digital bringing in fundamental changes to the way the tax system works, you should now be keeping your records in some sort of software. Most accounting software packages these days provide the ability for you to share your data with your accountant. So as long as your VAT returns are up to date, your accountant will be in a better position to prepare your accounts earlier.

If you are struggling with keeping your records up to date, you could consider appointing a bookkeeper. Some accountancy firms can provide this service in addition to preparing your tax return and accounts. They will also be able to electronically submit your VAT returns for you.

When you receive information that your accountant will need for your tax return, such as dividend vouchers, annual interest statements and stockbroker reports, send them on to your accountant. They can keep a record of these statements for when they prepare your return, and you won’t be trawling through your mountain of paperwork for something you received eight or nine months earlier.

So, if your tax return is late, it will not be a complete disaster. But better to deal with it sooner rather than later. There are financial penalties, but the quicker you deal with the return, the lower these penalties will be.