In our series we’ve been looking at easy ways for you to reduce the amount of tax that you pay. As well as using legitimate means to cut your tax bill, making sure you are organised and that you file your tax return on time can also help trim the amount you owe HMRC.
Keep reading to find out how paying your tax bill on time can save you hundreds of pounds.
52 Ways to Save Tax – Part 13 : Pay your tax on time
If you have to submit a self-assessment tax return then there are deadlines for sending in your information. These are:
- Paper tax return – midnight on 31 October
- Online tax return – midnight on 31 January
For example, for the tax year that ended on 5 April 2015 you have to submit your paper tax return by 31 October 2015 or your online tax return by 31 January 2016.
You also have to pay any tax that you owe by the 31 January deadline.
If you don’t file your tax return on time, you will face a penalty. You’ll get a penalty of £100 if your tax return is up to 3 months late and you will have to pay more if it’s later, or if you pay your tax bill late.
If you take longer to submit your return you can face a daily £10 penalty – which is capped at 90 days, or £900 – as well as interest on the amount outstanding.
HMRC figures show that 890,000 people missed the 31 January 2015 deadline for submitting their self-assessment tax returns, immediately adding £100 to the bill of almost a million people.
In some cases HMRC will waive the penalty. Reasonable excuses for failing to meet the submission deadline include:
- the death of a partner
- an unexpected stay in hospital
- issues with the online HMRC service
- unpredicted postal delays
- computer or software failure when preparing your tax return
In these cases HMRC may waive your penalty. Reports in May 2015 suggested that HMRC were waiving more of the penalties than normal if people provided a reasonable reason why they did not submit their tax return on time. However, simply submitting late may still see you pay at least £100 more than you have to.
Paying a surcharge on your VAT
It’s not just your income tax bill that may go up if you don’t pay on time. If you’re a VAT registered business then you can also face penalties if you don’t pay your VAT by the deadline.
HM Revenue and Customs (HMRC) record a ‘default’ if:
- they don’t receive your VAT return by the deadline
- full payment for the VAT due on your return hasn’t reached their account by the deadline
If you default you may enter a 12 month ‘surcharge’ period and if you default again during that period you could face a penalty.
For example, if you have a turnover of less than £150,000 you can face a 2% VAT surcharge if you default three times during a 12 month period.
You can also face a £400 fine for sending in a paper VAT return unless HMRC has told you that you are exempt from online submission.
All this means one thing: if you send your tax returns on time and make payments when they are due your tax bill will end up being lower.