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It can be daunting having to file a First self assessment tax return for the first time. Read our guide to when you need to do it, the advantages of using an accountant and why submitting your tax return early is beneficial. You must submit a self-assessment tax return if you are self-employed as a sole trader and earned more than £1,000 in the relevant tax year before deducting any tax reliefs. There are other reasons why you might need to file a tax return which are outlined here. If you are required to register for self-assessment with HM Revenue & Customs (HMRC). You must do so before 5th October after the end of the relevant tax year in which you became liable. For example, the deadline for the 2023/24 tax year is 5th October 2024. Your self-assessment tax return must be filed by 31st January in the following year. This is also the deadline for when you need to pay the tax you owe. For example, the deadline for the 2023/24 tax year is 31st January 2025. Is Hiring an Accountant Necessary for Filing Your Tax Return? There’s no legal requirement to hire an accountant to prepare your self-assessment tax return, and it’s entirely possible to do it yourself. However this DIY method can be a bit difficult, especially for those who are doing this for the very first time. It is also possible to be fined when you do it wrong or fail to meet the deadline. By hiring an accountant, you’ll feel confident that everything is being done in a timely manner and that all the required information from the HMRC is provided. The accountant can help you claim all expenses you are entitled to and help you maximise the tax savings you can get. The documents your accountant needs to see Your accountant will require various details to prepare your tax return. Income from self-employment: In the event that you earn kind of trading income you must deliver specifics and receipts of all earnings received and expenses paid. You should also supply copies of bank and credit card statements, including those for the month after the year end in case some payments cleared during the current year. Make sure you keep details of any business miles travelled as an element of motor expenses may be Income from employment: You will need to favor your P60 if you earn income from work. If your employment ended at the end of the year, then you must serve the P45 instead. If you have received any benefits in the form of cash, your accountant will require the P11D. The dividend income: The company must serve the details of any dividends that you have received throughout the during the year. They are typically provided by the business by way of a transfer guidance. Income from rental: As a tenant, you must to help in providing specifics of the rental revenue. Management costs as well as mortgage-related interest. Tax relief is offered on certain costs, including the mortgage’s interest payment. Pension contributions from private sources: Tax relief is accessible for private pension contributions. So it is important to add the details of every pension payouts made throughout the course of the year. Interest from banks: Your tax return must contain details of any interest that you have earned on building society and bank accounts. There is no requirement to declare tax-free items like ISAs. Other earnings or income: This could be from a pension company as well as a different self-employed position or even from the sale of shares, a rental home and so on. Why you should file your tax return early As a business owner you’re faced with enough work to complete and it’s common to delay the tax return filing until the very last minute. There are a lot of advantages to starting it early. Avoid errors The rush to complete your tax return in order in to meet the 31st of January deadline could result in mistakes. Taxes are complicated and you must ensure that you can give suitable time to provide to your tax accountant the complete data they require. Making your tax return late in the last minute may cause you to miss chances to cut down on your tax bill because you are not taking advantage of all tax reliefs. Accountants deal with a third of tax returns for their clients in January. So contacting yours early will make them very happy! Beware of any penalities Every penny counts so don’t leave it so late that you miss the filing deadline. You’ll be hit by an automatic PS100 filing penalty and if your tax return becomes more than three months late. It’s PS10 daily penalties up to a maximum of PS900. A penalty of the higher of PS300 or 5% of your tax due is then charged if your return is six months late and again if it’s over 12 months late. Improve cash flow plan In these economic turmoil, filing your taxes early is extremely beneficial to you control of your cashflow. Knowing precisely how much tax you have to pay in the months of January and June. If you’re paying payment on a credit card this means you are able to determine how you’ll pay the tax. First-time tax return filers may be awed by the requirement to make payments through a bank accounts. By filing early, you’ll ensure you’re able pay the bill or have the time to establish payments with HMRC should you be unable to settle the amount in the full amount. Get tax refunds before the deadline You may be due a tax refund and the sooner you file a tax return, the sooner you’ll receive it. Reasons for tax refunds include excessive payments on account based on the previous year’s income and HMRC making Account-Ease can help you in filling your tax return The best way to ensure your tax return is correct and submitted on time is to use an accountant. 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The deadline for filing your 2022/23 self-assessment tax return online was 31st January 2024. The deadline for paper tax returns was 31st October 2023. In some very rare situations, HM Revenue & Customs (HMRC) may give you a different filing date for your tax return. But otherwise, it is not usually possible to get an extension to the filing deadline. Regardless of how you filed your tax return, any outstanding tax should have been paid by 31st January 2024. Interest will be charged on late payments after this date. What are the penalties for late tax returns? If HMRC asked you to complete a tax return for 2022/23 and you missed the deadline, you will automatically be fined regardless of whether you’re just one minute late or how small your tax liability is. Even if you are due a refund, a penalty would also normally apply. The penalties for filing your self-assessment tax return late are currently as follows: 1 day late – Automatic fixed penalty of £100. 3 months late – £10 per day up to a 90 maximum of £900. 6 months late – £300 or 5% of the tax due, whichever is higher. 12 months late – £300 or 5% of the tax due, whichever is higher. In serious cases, you may even be asked to pay up to 100% of the tax due instead. These penalties are in addition to one another, so the minimum late filing penalty for a tax return that is 12-months late will be upwards of £1,600 depending on the tax liability. Penalties for late payment of tax are: 30 days late – 5% of tax due Six months late – 5% of outstanding tax due at that date 12 months late – 5% of outstanding tax due at that date It is also important to bear in mind that interest will be charged on top of these penalties on the outstanding tax due, plus any outstanding penalties due. This is charged at a rate of 7.75%. My tax return is overdue, what should I do? Firstly, you need to consider if the tax return is required or if you have a legitimate reason for the delay: Cancelling a tax return You can use the ‘ask HMRC online’ option and speak to a webchat advisor or complete a form online. If HMRC agrees, you no do not need to file a return and any penalties issued for missing the deadline should be cancelled Remember to note down who you spoke to and when, what outcome is expected and when you will receive their decision. HMRC is unlikely to withdraw a return if you have been self-employed at any point during the tax year – even a very short time will count. Typically, you will only have two years from the end of the tax year for which the return is due to request its withdrawal, but it’s always better to deal with your tax affairs swiftly. Reasonable excuses If you have a good reason for the delay, you may be able to appeal against the penalty. HMRC lists several common examples of Reasonable Excuses on its website. These include: Your partner or another close relative died shortly before the tax return or payment deadline You had an unexpected stay in hospital that prevented you from dealing with your tax affairs You had a serious or life-threatening illness Your computer or software failed just before or while you were preparing your online return Service issues with HMRC online services What’s unlikely to be reasonable excuse? The following aren’t usually accepted as a reasonable excuse: you relied on someone else to send your return and they didn’t your cheque bounced or payment failed because you didn’t have enough money you found the HMRC online system too difficult to use you didn’t get a reminder from HMRC you made a mistake on your tax return If you’ve missed the deadline, file your tax return as quickly as possible If the tax return can’t be withdrawn and you don’t have a good excuse, the next best thing is to file your tax return as soon as is practical – even if you can’t afford your tax bill yet. As you’ve seen, the late filing penalties will increase the longer the delay. How long do I have to change my tax return? If you make a mistake on your tax return, you can amend it. To amend a tax return online you must make your changes within 12 months of the self-assessment deadline (by 31st January 2025 for a 2022/23 self-assessment tax return). After this deadline has passed, if you need to change your tax return, you’ll need to write to HMRC. Need more help? We love working with self-employed professionals and independent business owners and if you are not receiving the service and support you deserve from your accountant then please talk to us on 0208 133 4599or use our online enquiry form.

Setting up as a sole trader is the most popular way of starting up a new business in the UK. It’s especially common amongst those going into business on their own for the first time. Starting your business as a sole trader has a number of advantages. These must be set against the disadvantages of the sole trader business model. The advantages of operating your business as a limited company. The positives about being a sole trader are: Full Control Being a sole-trader, you are in complete control of your company, and in the sense of ‘being your personal boss’. There is no need to consult with any other shareholders or directors, take note of their opinions, or alter your idea of what you want to achieve with the business. You are able to develop the business exactly in the way you want. Operational flexibility Since you are able to make your own choices on your own, it could be easy and fast to alter the company in order to adjust to changes in the market. For instance you could change the structure of your pricing or the services you offer by adding new products or eliminating those you don’t trust. This ability to make quick decisions and then implement them swiftly is an benefit when you are a sole-trader operating in an ever-changing, competitive market. In addition to acting as the only decision maker an individual trader will typically be in close contact with their clients. They are therefore able to be attentive to the requirements of their clients and their demands and able to respond swiftly and effectively to their needs. A few customers, particularly those seeking personal services might be turned off by the fact that it’s a small-sized company even if it’s passionate about customer service. This is especially true for local services, where a sole trader could gain trust and build confidence by relying on local roots and connections. A limited company, even if it is controlled by one person could appear unassuming and too corporate to certain. Easy and quick to start While forming a limited company is far easier that it used to be, setting up as a sole trader remains the quickest and simplest way to get your business up and running.t is not necessary to register your company through Companies House, therefore there are no Companies House forms to complete. There is a need to must inform HMRC that you are self-employed and running your business as sole trader. Low setup costs A lot of people use the services of a solicitor or a form agent to establish a limited-company (although it’s not difficult to begin a business by yourself). There’s generally less requirement for professional guidance in the event of becoming a self-employed sole trader. This means that these costs are lowered but not eliminated completely. There are no additional fees payable towards Companies House when setting out as sole trader. It is also unlikely that you will require any capital to get your company up. Running at the beginning however, it all will depend on the type of work your company will perform. In some industries, operating expenses are very excessive whatever the legal status of the company. Accounting simplified Accounting is easier for sole traders than for limited companies, and there’s no requirement for annual reports or an annual Corporation Tax return, although you’ll still have to keep the records of expenses and invoices. If you’re a sole trader, you have to file a self-assessment tax return that includes details of the earnings from trading you’ve conducted as sole trader. Since there’s less accounting tasks to do and your accountant could cost you lower than you would if were operating as a limited company. It’s easier to change your mind People starting out on their own in business for the first time often do so on a part-time basis. They may remain employed elsewhere so they retain the security of a salary. Many people dipping their toes into the water of running a business will choose to do so as a sole trader. This allows them to wait until they have more confidence in the business. Its ability to support them and their family before deciding whether a limited company might work better. With its less formal appearance, operating a separate business as a sole trader might also be easier to explain. Justify to your current employer than forming a limited company for the same purpose. If you start out as a sole trader, you can always choose to form a limited company for the business at a later point. If you form a limited company at the outset and later want to operate as a sole trader. You’ll have to go through a more formal process of closing the company first. The right business structure will depend on your individual circumstances. For many the advantages of a limited company will outweigh the potential benefits of operating as a sole trader. There are also disadvantages to operating as a sole trader, which you should consider. Professional advice from an independent professional who knows your circumstances. Such as your accountant or solicitor, is always useful if you’re unsure how best to set up a new business.

Introduction: Welcome to our comprehensive guide on the latest changes to penalties for late self-assessment tax returns and tax payments in the United Kingdom. In this blog post, we will provide a detailed examination of the current penalties, the reasons behind the changes, the implementation timeline, and how the new penalties will function. Additionally, we will discuss the benefits of submitting your self-assessment tax return early and how Account-Ease Accountants can assist you throughout the process. What are the Current Penalties for Late Self-Assessment Returns and Late Tax Payments? Under the current regulations, the penalties for filing a self-assessment tax return late are as follows: One day late: An automatic fixed penalty of £100 will be imposed. This penalty applies regardless of whether any tax is owed or if the tax due has been paid on time. Three months late: A daily penalty of £10 will be charged, up to a maximum of £900 for a period of 90 days. This penalty is in addition to the fixed penalty mentioned above. Six months late: A penalty of £300 or 5% of the tax due, whichever amount is higher, will be levied. This penalty is in addition to the fixed and daily penalties mentioned earlier. Twelve months late: A penalty of £300 or 5% of the tax due, whichever amount is higher, will be imposed. This penalty is in addition to the fixed, daily, and six-month penalties discussed above. Furthermore, if it is discovered that there has been a deliberate withholding. Concealment of information for more than 12 months, additional penalties may apply. In the case of late payment of tax, the current rules state the following penalties: 30 days late: A penalty of 5% of the tax due will be charged. Over five months after the initial penalty: A penalty of 5% of the outstanding tax due at that date will be imposed. Over 11 months after the initial penalty: A penalty of 5% of the outstanding tax due at that date will be levied. It is important to adhere to the deadlines for filing self-assessment tax returns and making tax payments to avoid these penalties. Prompt submission and timely payment are crucial to prevent unnecessary financial burdens and potential further penalties.   Under the current UK tax laws, taxpayers who file their self-assessment returns or make tax payments after the designated deadlines are subject to penalties. We will explore the penalty structure in-depth, outlining the different levels of fines based on the duration of the delay. By understanding the financial implications of late submissions and payments, you can make informed decisions to avoid penalties. Why are Penalties for Late Self-Assessment Returns and Late Tax Payments Changing? The authorities have decided to revise the penalty system for late self-assessment returns. Late tax payments in order to encourage timely compliance and ensure fairness. We will delve into the motivations behind the changes, such as promoting better tax administration and discouraging unnecessary delays in filing returns and paying taxes. Understanding the rationale behind the updated penalties will provide insights into the overall tax compliance framework. The Government first announced reform of sanctions for late submission and late payment as part of the Spring 2021 Budget delivered by the then Chancellor Rishi Sunak. The change sees a move to a points-based system and the reforms start with VAT and Income Tax Self-Assessment (ITSA). When will Penalties for Late Self-Assessment Returns and Late Tax Payments Change? To effectively navigate the revised penalty system, it is crucial to be aware of the implementation timeline. We will provide the specific date when the new penalties will come into effect. Allowing taxpayers to plan and adapt accordingly. This information will help you avoid unexpected penalties and prepare for any adjustments needed in your tax filing and payment processes. Businesses, self-employed individuals, and landlords with income over £50,000 will be mandated to join first from April 2026. The rules will apply to those with income over £30,000 from April 2027. How will the New Late Submission Penalties for Self-Assessment Work? Under the updated regulations, the penalty structure for late submission of self-assessment tax returns will change. We will explain the new penalty bands in detail, outlining how penalties will be calculated based on the duration of the delay. Additionally, we will discuss any additional considerations taxpayers should be aware of to avoid fines, such as exceptions or mitigating factors. The penalty thresholds will be as follows: Submission frequency Penalty points threshold Annual returns 2 Quarterly returns 4 Monthly returns 5   How will the New Late Payment Penalties for Self-Assessment Work? Similarly, the penalty system for late tax payments in the self-assessment regime will undergo revisions. We will explore the revised penalty rates, the method of calculating penalties, and any exceptions or mitigating factors that may apply. Understanding these changes is crucial to avoid unnecessary financial burdens and ensure timely tax payments. No penalty will be imposed if the outstanding tax is paid within 15 days after the due date. The first penalty is applied when the payment is overdue by 16 days or more. The second penalty is enforced when the payment is 31 days or more overdue For the first penalty, the amount is 2% of the tax due after day 15. The second penalty is 2% of the tax outstanding after day 15 plus 2% of the tax outstanding at day 30. The Benefits of Submitting Your Self-Assessment Tax Return Early Submitting your self-assessment tax return ahead of the deadline offers numerous benefits. In order to avoid penalties, it is important to file your tax return and pay your taxes on time. Although you have until 11:59 pm on the deadline day to file, there are numerous advantages to filing your tax return early. These benefits include: Potential Tax Refunds: Filing your tax return early allows for timely processing of any potential tax refunds you may be eligible for. There are various reasons you might be entitled to a refund. Such as excessive payments made