If you receive a ‘Notice to File a Tax Return’ from HMRC, please don’t ignore it …
Whether or not you meet the criteria for Self-Assessment, you must complete a Tax Return if HMRC sends you a notice to do so.
However, if you don’t meet the criteria, you can ask HMRC to take you out of Self-Assessment. Not having to complete a Self-Assessment Tax Return form each year sounds like good news, but it does come with risks
- If you are employed and/or receive pension income, HMRC will probably not correct inaccuracies in your tax code and small underpayments of tax may go on for years (see below).
- If you have an unexpected income tax or capital gains tax liability, you’re required by law to tell HMRC about it – in writing – no later than 5 October following the end of the tax year the tax liability arose in (i.e. by 5 October 2023 for 2022/23)
Generally speaking, you should complete a Tax Return if you are in receipt of untaxed income (e.g. interest, rental income, dividends), you are self-employed, you receive income from a Trust and/or an Estate, and/or you receive foreign income. These are just a handful of scenarios!
There are thresholds that can apply to some types of income – if you think you might need to file a Tax Return, call one of our friendly tax advisers on 01223 810100 to discuss your next steps.
It is estimated that more than one in three tax codes are incorrect!
Have you checked your Tax Code recently?
Your PAYE tax code doesn’t determine how much tax you’ll ultimately pay, it is effectively a mechanism to pay your tax on account, during a tax year. Adjustments are often included for pensions, benefits in kind, untaxed interest, and estimated tax underpayments (which can, more often than not, be incorrect).
If you file an annual Tax Return, the position will be rectified but your cash flow might be affected. However, if you don’t file annual Tax Returns and are no longer receiving a benefit from your employer (such as a company car), are intending to draw less of your pension in the current tax year than the previous year or a source of untaxed income has ceased – call HMRC and arrange for your tax code to be corrected.
