The tax deadline at the end of January

Money Talk By Paul Davies Head of Tax, Ernst & Young UK

Paul Davies, Ernst & Young

It is that time of the year again.

Were you sent a tax return for 2006/07 by 31 October last year?

If so, you have until 31 January 2008 to complete it and send it back, if you have not done so already.

That is also the deadline for paying any outstanding tax for 2006/07, if you have still not paid up.

So, before you spend another weekend at the January sales, remember that failing to submit your tax return on time could cost you all of the money you have saved in the shops.

Penalties

Taxpayers should be aware that HM Revenue and Customs (HMRC) can impose a wide range of charges for the filing of returns or late payment of tax.

Late payment of tax attracts interest and, in some cases, an additional surcharge

If you miss the 31 January deadline, you face a penalty of �100 with a further �100 charge if the return is still outstanding six months later.

After a year, a potentially more significant penalty of up to 100% of the outstanding tax may be applied.

Persistent late filers risk suffering even more financial pain.

HMRC can ask the independent Appeal Commissioners for permission to impose a penalty of up to �60 per day.

This can add up pretty quickly and HMRC has indicated that it will be more vigilant in cracking down on such individuals.

And it does not end there.

Late payment of tax attracts interest and, in some cases, an additional surcharge.

Forms

So how do you make sure that you do not find an unwanted extra bill on your doormat?

Submitting your return and payment on time is easier than you might think, particularly if you have everything you need to complete your return before you sit down to do it.

Start by finding all your papers relating to the 2006/07 tax year.

The type of things you are looking for are details of your salary or pension (form P60), benefits in kind (form P11D), bank and building society statements and dividend vouchers.

If you are self-employed you will need your accounts for the period ending in 2006/07.

Do not forget outgoings, such as personal pension contributions and payments to charity as these may generate additional relief if you are a higher rate taxpayer.

You will need a tax return form and a tax calculation guide which should be in the pack that you received from HMRC.

If you cannot find your form, or you do not have the appropriate supplementary pages, you can download them from the HMRC website or call the self assessment order line on 0845 9000 404.

Online

The thing that puts most people off filling in their tax return is the sheer number of pages.

HMRC has been encouraging online filing for several years

However, you only need to fill in the boxes that are relevant to you so it is really not as daunting as it looks.

The text at the start of each section will serve as a memory jogger and, if the section does not apply to you, simply move on to the next one.

The easiest way to complete your form is to do it online but, if you have not already done so, you will need to register with HMRC by 22 January to get an activation code.

Assuming you register in time, the online system will guide you through the whole process.

If you are using the paper form, complete it as far as you can together with any supplementary pages that are relevant to your circumstances.

At this stage you need to embark on your tax calculation.

This will enable you to determine any outstanding tax that is due.

Do the maths

Once again, you will not need to enter figures into every single box; simply start at the beginning and work your way through.

If you have tax to pay it is too late for it to be collected through your PAYE code and you will need to send a cheque with your form

You will find yourself referring back to boxes that you have already been through so, for the avoidance of doubt, you may find it helpful to enter zero in the boxes that are not relevant.

The tax calculation guide will tell you what figures to enter where on the main tax return form and, once those are complete, carry on to the end of the form - which should now be ready to send off to HMRC.

If you have tax to pay it is too late for it to be collected through your PAYE code and you will need to send a cheque with your form.

If you do not pay by 31 January you may be liable for interest charges.

And remember, once the signed form, together with the cheque where necessary, is safely en route to HMRC you can sit back and relax, comfortable in the knowledge that you have saved yourself at least �100 without setting foot in a single department store.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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