Get your tax return in or face huge financial penalties

Get-your-tax-return-in-or-face-huge-financial-penalties

Urgent advice on buy-to-let tax

Tax. It’s one of the dirtiest words I know. But, as Benjamin Franklin famously said, along with death it is the only certainty in life. I hate it. I don’t know too many people who love it if any. But it’s not only the amount I have to pay that gets my back up. It’s the paperwork you must do to be told you owe buy-to-let tax.

Are you late filing your Self Assessment?

Doing your Self Assessment is a bore and a chore. So, you put it off. You’re not the only one. According to HMRC, almost three-quarters of a million people missed the deadline to file their 2016/17 Self Assessment. Most of these don’t know how much this could cost them – on top of the tax demand they’ll receive.

What are the deadlines for filing Self Assessments?

If you’re filing your Self Assessment on paper, you should make sure HMRC receive it by October 31st following the end of the tax year for which you are filing. For example:

  • For tax year 2016/17 (end date 05/04/2017), you must file by 31/10/2017
  • For tax year 2017/18 (end date 05/04/2018), you must file by 31/10/2018

For online tax returns, you have a little longer:

  • For tax year 2016/17 (end date 05/04/2017), you must file by 31/01/2018
  • For tax year 2017/18 (end date 05/04/2018), you must file by 31/01/2019

There are other deadline rules for partnerships and if one of the partners is a limited company. You can see the full list of deadlines on the Government/HMRC website.

File late and get a fine

The fines you get for putting off your Self Assessment are taxing themselves. They start at £100 and then escalate rapidly after three months. Of course, the taxman doesn’t really want to fine you! In a recent article published in the Financial Times, a spokesman for HMRC said:

“We don’t want penalties, we just want tax returns. Taxpayers with a reasonable excuse for filing late or who have been taken out of the Self Assessment system do not have to pay penalties. Taxpayers who file on time are not issued with penalties.”

The fact remains that late filing fines are a lucrative source of income for the government. With around 750,000 people sending their tax returns in late each year, the initial fines alone work out at £75 million.

If you file late, you’re giving the government free money. Your money. Even worse, you’ll still have to pay the tax you owe!

File later and get hit harder

How bad could your penalty for late filing get? Well, every day that you don’t file after the first three months past the deadline will incur an extra £10 in fines.

HMRC has set a maximum of £900 on the fine you’ll get for late filing. Then again, it hasn’t, because in its sneakiness (did I really just say that?), HMRC will fine you again six and 12 months after the deadline.

How much could late filing cost you?

So, just now how much could the late filing of your Self Assessment (or paying your tax bill late) cost you? Here’s an example:

  • You file online. You haven’t done so by January 31st. On February 1st, you are fined £100.
  • By 1st May, you still haven’t filed your Self Assessment. Oops, it’s now costing you another £10 every day.
  • On August 1st, you’re now six months late. You are now charged an extra £300 or 5% of the tax you owe, whichever is the greater.
  • Leave it for another six months, and you’ll be hit with another £300 fine or 5% of the tax you owe, whichever is the greater.

What if you’re late filing and late paying the tax you owe?

Oh, boy, if you’re in this camp, then you’re going to be hit with a double whammy. Because you’ll be charged penalties or fines on both the late Self Assessment and the late payment.

What if you’re employed and pay tax through PAYE?

Many property investors have jobs. They pay tax through PAYE, which their employer sorts out for them. If this sounds like you, don’t think you can breathe a sigh of relief.

You’re a property investor. You have another source of income. The taxman wants to know about it, and he’ll probably want a slice of it. You must file a Self Assessment.

If you own an investment property and don’t file a Self Assessment, then the fines above will be levied on you.

And it gets worse

Just when you thought it couldn’t get any worse, it will. Because those fines and penalties that have been heaped upon aren’t the end of it. HMRC can then charge interest on the lot.

Don’t make it worse still

If you’re concerned by now, you should be. But you mustn’t panic. Don’t fill in a Self Assessment form and rush it into the taxman. It’s got to be accurate because if it’s not and HMRC believes that you have filled your forms in carelessly (or misled them), they can charge you between 30% to 70% of the tax you owe. And if they think you have deliberately misled them, they could double the tax you owe them.

Avoid a massive hit on your finances – keep it simple!

If you file your Self Assessment late or are late in paying the tax you owe, you could end up paying thousands in fines, penalties, and interest – even if you didn’t owe any tax!

My advice is to get your head out of the sand. Always file on time, and then make sure you pay your tax on time – and keep it simple.

I use professionals to do the job for me. My accountant tells me what paperwork they need. Because they understand property investment, they know how to minimise the tax I owe.

So, I avoid penalties, fines, and interest on them and the tax I owe. And I pay only the tax I must and not a penny more. Isn’t it time you did the same?

If you own an investment property and haven’t filed your Self Assessment forms, or are unsure whether you need to, contact Gladfish today on +44 207 923 6100. We’ll help you to identify your buy-to-let tax needs, and show you what to ask an accountant to ensure he’s the right one to minimise your tax on property investment.

Live with passion and fun,

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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