More than 700,000 taxpayers filed a paper tax return last year. But if you’re planning to be one of them this year, you must make sure HMRC receives your documents by midnight on 31 October.
While the majority of people choose to file their tax returns online, HMRC reported receiving 703,943 paper forms for the 2017-18 tax year, making up 6.5% of the total number submitted.
It’s a task many people still dread, so we’ve come up with seven top tips to make filing your tax return as easy and stress-free as possible – along with how to avoid a fine.
1. Organise your important documents
When you finally sit down to get to grips with your tax return, the last thing you’ll want to do is start hunting around the house for banking statements and receipts when you’re halfway through.
Getting your required documents together beforehand will mean you’ll be free to focus on the forms.
Documents you’re likely to need could include:
- bank and building society statements
- pension statements
- contracts for the sale of assets
- letting agreements.
Once you’ve submitted your tax return, you’ll need to keep these records in case HMRC requests to see them. Keep in mind it has the powers to visit your premises and inspect your books at any time.
There are no rules on how you should keep these records, but HMRC can charge a penalty if your records aren’t deemed to be accurate, complete and readable.
2. Make sure you have the right forms
If your tax situation is straightforward, you may only need to submit the main SA100 form. This will mainly ask you to record various types of income you’ve received during the 2018-19 tax year, as well as any tax reliefs you may qualify for.
However, there are a number of additional supplementary pages you might need. These can either be downloaded from the HMRC website, and then printed off, or you can call HMRC on 0845 900 0404 and ask for them to be posted to you. At this point, however, there may not be enough time to receive them before the deadline.
You’ll need to fill out supplementary pages if, for instance, you have less common types of income or tax reliefs, are part of a business partnership, you’re a landlord receiving rental income, or you have made capital gains.
For the full list of supplementary pages, and who needs to fill them out, see our guide on paper tax returns.
3. Don’t forget your expenses
We’ve previously reported that many people are paying too much tax by failing to claim expenses.
People commonly forget to factor in money spent on fuel, phone costs, car servicing and car insurance, and the use of a home office.
You can also claim expenses on things such as bills, travel and accommodation, and equipment for your business from laptops to stationery.
These costs, when used solely for business purposes, can be offset against the profits you make, therefore reducing your tax bill.
Failing to report your expenses could mean paying up to £355 extra tax when you don’t need to.
- Find out more: tax-deductible expenses
4. Double check your details
It’s easy to panic when you know a deadline is looming, but it’s worth taking the time to make sure the details on your tax return are correct.
HMRC has a penalty system for those who submit inaccurate tax returns. The amount you’ll pay will depend on whether HMRC thinks you have been careless or are actively trying to mislead it.
The penalties are as follows:
- No penalty: you’ve taken reasonable care to fill in your return correctly
- 0-30% of the tax you owe: you’ve made careless mistakes
- 20-70% of the tax you owe: you’ve deliberately underestimated your tax
- 30-100% of the tax you owe: you’ve deliberately underestimated your tax and attempted to conceal it
If there are figures you have to estimate, make sure you tick the box saying the figures are provisional. You can then submit an amendment to HMRC once you have the correct information.
5. Don’t be late
If HMRC receives your paper tax return later than midnight on 31 October, you’ll be fined £100, even if it was posted earlier. So, make sure you allow enough time for the tax return to get to its destination.
The fines increase depending on how late your tax return arrives:
HMRC accepts a few ‘reasonable excuses’ for filing late, and may waive a late penalty.
It defines a reasonable excuse as being ‘normally something unexpected or outside your control that stopped you meeting a tax obligation’, such as:
- the recent death of a partner
- an unexpected stay in hospital
- computer failure
- an issue with HMRC’s services
Each case will be considered individually.
- Find out more: late tax returns and penalties for mistakes
6. If you think you might be late, submit online instead
If you’re not certain you’re going to submit on time, you may be better off opting for an online return instead – this will give you up to 31 January 2020 to submit.
However, if it’s your first time filing online, you’ll need to sign up for an activation code. This will arrive by post, which can take up to seven days.
Whatever you do, don’t send off both types of return. Submitting a late paper tax return, followed by an on-time online return, could still result in a fine, as HMRC charges you according to the return it receives first.
- Find out more: online tax returns
7. Pay your tax bill on time
Even if you submit your tax return on time, there’s still the matter of paying the tax you owe.
If you’re employed and owe less than £3,000 in tax, this can be taken via Pay As You Earn (PAYE). If you’d prefer to pay in a lump sum, you’ll have to make this clear on your return.
Bills that aren’t paid through PAYE will be due by 31 January 2020. If you miss this deadline, you’ll be charged interest from this date at 3.25%.
If your payment is more than 30 days late, you’ll be charged additional penalties:
- After 30 days: a charge equal to 5% of the tax outstanding
- After six month: a further 5%
- After 12 months: an additional 5%.
If both your tax return and and your payments are late, you’ll be charged both penalties.
Who needs to pay tax by self-assessment?
HMRC will often contact people who it thinks need to submit self-assessment tax returns. If you receive one of these letters, you’ll need to submit a tax return (even if it turns out you don’t owe any tax).
Though you might be sent a return through the post, you can still opt to submit it online.
You shouldn’t rely on HMRC to contact you, though. The law states it is your responsibility to make sure you declare your full taxable income each year.
People who will need to pay tax by self-assessment include:
- self-employed workers
- business partners
- directors of limited companies
- employees or pensioners with annual incomes of £100,000 or more
- those with pre-tax investment income of £10,000 or more
- child benefit claimants who earn more than £50,000 a year (or their partner does)
- those with income from abroad
- trustees of trusts or registered pension schemes
- those who received a P800 form from HMRC saying you didn’t pay enough tax last year
- ‘names’ at Lloyd’s of London insurance market
- ministers of religion
- trustees or representatives of someone who has died.
For the full list of instances where you’ll be required to submit a return, see our guide on how to fill in a self-assessment tax return.