I haven’t been sent a tax return: is it true I don’t need to do anything ?
6th April 2017
The UK 16/17 tax year ended on 5 April 2017.
If HMRC sends you a notice to complete a tax return you have to fill it in.
You have till 31 January 2018 to complete the 16/17 tax return if filed online. If you do it on paper you must send it in by 31 October. If HMRC issues you a tax return and you really do not need to fill it in, you can ring HMRC, explain why, and ask them to cancel the notice. Don’t just ignore the return: you will be fined.
But what if you haven’t been sent a return? The tax system relies on the concept of “self-assessment”. This puts the onus on you, but maybe isn't widely understood. It is your legal responsibility to decide if you need to declare anything, and then to let HMRC know. So, if you haven’t been sent a tax return you may still need to ask for one.
Let’s look at who might need to do this.
If you think you might fall into any of these categories, come and talk to us, and we will help you work out what you need to do. The following general outlines do not consider all the possible reliefs and allowances that may apply to individual circumstances. You might find that you are due a refund of tax.
People receiving more than £5,000 in dividend income.
Up to tax year 15/16, if you had salary or pension, plus dividends, you usually did not need to do a tax return. Your salary was taxed at source, and dividends were tax free, unless your income was higher than £42,000. For higher incomes, additional tax was due on investment income and you probably already complete tax returns showing this.
From 16/17, the way dividends are taxed has changed. In tax year 16/17, if you receive less than £5,000 from dividends there may still be no tax to pay. But if your investment income is more than this you probably do need to complete a tax return this year. The dividend income will be taxed at 7.5% (with higher rates for higher incomes.) The Chancellor is reducing the tax free band for dividends down to £2,000 in tax year 2018/19.
People who receive more than £500 in bank interest.
Bank interest is no longer taxed at source. If you have this type of investment income you may need to start completing tax returns. There are different tax free allowances depending on your overall income.
Income from ISA accounts does not count.
People with rental income
If you have rental income then you should be completing tax returns and professional advice will help you do this correctly.
Income from overseas
If you have rental or investment income overseas you may complete overseas tax returns, and you might think that is all you need to do. Don’t make the easy mistake of assuming that you do not need to put this income on UK tax returns. If you are a UK resident you are required to disclose all income from all your worldwide sources. There may be adjustments to stop you being double taxed.
If you receive money from offshore trusts the tax treatments are particularly complex, so it is best to ask for professional advice.
Other types of income that you might have received since 5 April 2016
Have you started working as a self-employed person – this could include E-bay trading ?
Have you received income from any kind of UK trust?
Have you taken money out of a single premium insurance policy, creating a chargeable event gain?
Has PAYE worked correctly on your salary or pension?
If you changed jobs in 16/17 or maybe had more than one job, the PAYE system may not always work correctly. People with several small pensions can find that the system tends to overcharge them. It can be worth checking if you are due a refund.
What if you are several years behind in declaring income?
HMRC is using smart data analytics to join up the dots and identify people who have undeclared income in the UK. Rentals and investment income are probably the easiest for them to spot. When HMRC identifies arrears they ask individuals to declare the backlog. They charge interest and penalties.
If you have any kind of undeclared historic income please do come and talk to Rose Duly. She has many years’ experience in dealing with voluntary disclosures and can help you through the process. If you make a voluntary disclosure the penalties charged are significantly lower than if disclosures have been required by HMRC.
HMRC also has new international information exchange agreements, including most of the main tax haven countries and will use smart systems to match up records. If you need to catch up on an offshore issue it is particularly important to have professional advice.
Arrears cases are almost always treated as civil offences, not criminal, so if you do need to catch up on tax matters you should not worry about being sent to prison. Installment payment arrangements can often be agreed.
Most people find great relief from sorting out historic problems, even though the financial hit can be tough. One former client was a young health professional who was 6 years behind in declaring his very significant income. He was terrified he might be sent to prison and it was difficult to calm him down and persuade him that this was unlikely. Once this sunk in, he felt able to propose marriage to his then pregnant girlfriend. He is now married, an enthusiastic dad, and up to date with HMRC.