Is a tax return filing necessary even if no tax is owed?
In the UK, individuals who earn more than £1,000 from sources other than payrolled work are required to submit a self-assessment tax return, even if their total income falls below the £12,570 tax-free personal allowance. This requirement, enforced by HMRC, comes with potential penalties for late submission, a concern that has been raised by tax experts and advocates due to its impact on low-earners.
The penalties for late submission start immediately after the deadline (31 January) with a fixed £100 fine, regardless of whether any tax is owed. If the return is still not filed after three months, a daily penalty of £10 is added for up to 90 days, potentially adding £900 more. At six months late, an additional penalty applies of £300 or 5% of tax owed, whichever is greater. This penalty repeats at 12 months, potentially making the total minimum penalty £1,600 for a return 12 months late, even if no tax is owed.
Low-earners are disproportionately affected because these penalties apply even if they owe zero tax. The fixed initial penalty and daily fines can accumulate to a substantial sum relative to their income, creating a heavy financial burden. For example, a low-earner owing no tax could face fines totaling £1,600 after a year of late filing.
This policy has been described as "unjust" by tax experts, who argue that people with no tax liability should not be penalized so heavily. They have called for penalty waivers or reforms to protect vulnerable taxpayers. Dan Neidle, founder of Tax Policy Associates, urged the government to act and "stop the most vulnerable in society having their lives made harder by HMRC."
To avoid these penalties, it's essential to file your tax return on time. The deadline to file your tax return for the 2024/25 tax year is 31 January if you plan to complete it online and 31 October if you're submitting a paper return. You need to have registered with HMRC by 5 October for paper returns.
If you believe that you have incorrectly received a penalty for filing your tax returns late, you have the option to appeal to HMRC within 30 days of receiving the notice. Additionally, if you are no longer required to file tax returns (for example, if you used to be self-employed but now work for a larger company), you must notify HMRC by filling out an online form on gov.uk to close your self-assessment account and ask to be removed from self-assessment for a specific tax year.
For more information and a step-by-step guide on how to file your tax return, read the guide to filing your tax return. This article will provide valuable insights into the process, helping you to navigate the complexities of self-assessment and avoid potential penalties.
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In the realm of personal-finance, as one navigates the complexities of self-assessment, timely filing of tax returns is crucial to avoid unaffordable penalties. For instance, a low-earner with no tax liability could face fines totaling £1,600 after a year of late filing, demonstrating the significant impact of these penalties on individuals' savings and property.
Tax experts, such as Dan Neidle, argue that these heavy penalties on vulnerable taxpayers are unjust, prompting calls for penalty waivers or reforms to protect them. Thus, understanding and adhering to tax-filing deadlines - 31 January for online tax returns and 31 October for paper returns - can prove essential in preserving one's financial security and reducing potential disputes with HMRC.
