Mr K.L. Asks:
I have been hearing adverts on the radio regarding Self Assessment Tax Forms and the fact that they are due by the end of this month. I have not been sent one by the Inland Revenue but I am higher rate tax payer and have savings interest, a rental property and also some shares that pay dividends. Do I need to complete a Self Assessment form even though I have not been sent one?
Peter Sharratt Answers:
The clue is in the title; ‘Self Assessment’, basically it is up to the individual to determine if they owe tax and if so notify HMRC (taxman). You can do this by registering online at www.hmrc.gov.uk. Failure to notify can result in a penalty and HMRC have a useful fact sheet on this subject called ‘take care to tell us about your tax on time’. It details various reasons why they may charge a ‘failure to notify penalty’. Included in this list is ‘someone who has not received a self-assessment return or notice to file does not tell us that they may need one because they have untaxed income or capital gains’.
Ultimately as a higher rate tax payer (40%) you should pay additional tax on your savings and dividend income as this is only taxed at source at basic rate (20%, or in the case of dividends a rate equivalent to basic rate). Also the rental property presumably provides you with an income which should be declared. You will be able to deduct certain expenses from the rental income such as letting agent’s fees, maintenance costs and the interest element of any mortgage used to buy the property.
Taking expenses in to consideration there may be no tax payable but you still need to declare it. The penalty for failing to notify depends on the reason which is split in to 4 categories; reasonable excuse, not deliberate, deliberate, and deliberate & concealed. It also depends on whether the disclosure was unprompted i.e. you told them, or prompted, i.e. they found out. The penalties can be high (too detailed to list here). There are also penalties for filing your return late even if tax is not due. This is £100 for the first day plus £10 per day thereafter for the next 90 days. After this period the penalties continue to increase. Given the penalties involved and the worry if you have any doubts I would suggest you contact HMRC. The 31st January deadline is rapidly approaching.
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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
