Is there a requirement to submit a tax return if no tax is owed?
Low-Income Individuals Face Penalties for Late Self-Assessment Tax Returns
For those who may need to file a self-assessment tax return in the UK, it's essential to understand the consequences of missing the deadline, even if tax owed is minimal or nonexistent.
Firstly, a fixed £100 late filing penalty is imposed immediately after the deadline, which is usually on the 31st of January[1][3]. This penalty applies regardless of whether any tax is due.
If the return is more than three months late, daily penalties of £10 can be charged, reaching a maximum of £900[1][4]. After six months, an additional penalty of £300 or 5% of any tax owed, whichever is greater, is added[1][2][4]. This penalty can potentially double if the return is more than 12 months late.
Interest is also charged on any unpaid tax, including late payment penalties[4].
For low-income individuals who potentially owe little or no tax, the key takeaway is that the fixed £100 late-filing penalty applies regardless of tax liability[1][3].
HMRC does allow for appeals or penalty reductions if there is a reasonable excuse or special circumstances[4]. Low-income individuals facing difficulties should communicate early with HMRC to potentially reduce penalties.
It's important to note that a self-assessment tax return is required if you have untaxed income such as rental income, tips and commission, foreign income, or income from savings and investments[5].
The government provides an online portal to help you determine if you need to send a self-assessment tax return to HMRC[6]. The deadline to file your tax return for the 2024/25 tax year is the 31st of January if you plan to complete it online and the 31st of October if you're submitting a paper return. For paper returns, you need to have registered with HMRC by the 5th of October[6].
If the tax return is three months late, the fine increases by £10 per day for the next 90 days, reaching a maximum of £900[1][4].
People who earn more than £1,000 in income from sources other than payrolled work are required to fill out a self-assessment tax return[5].
Those who believe they have incorrectly received a penalty for filing their tax returns late are able to appeal to HMRC within 30 days of receiving the notice[2].
For those who no longer need to file tax returns, such as those who 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[2].
In conclusion, while the size of the tax owed might be small or nil for low-income individuals, missing the self-assessment deadline triggers automatic penalties starting with a £100 fine, daily penalties if late beyond three months, and greater penalties if late for six months or more[1][4]. Interest on late payments applies if any tax is owed[4].
Personal-finance management for low-income individuals is crucial, especially when handling self-assessment tax returns in the UK. Despite possibly owing little or no tax, a fixed £100 late-filing penalty still applies, regardless of tax liability.
