31 July deadline for self assessment and tax credits

Monday 21 July 2008

31 July marks the deadline for some important deadlines for income tax self assessment and, if relevant, for renewing your tax credits claim. What deadlines are approaching and what are the penalties for missing these?

What self assessment deadlines are approaching?

Second payment on account for 2007/08

The end of July is an important income tax self assessment deadline if you have to make payments on account in relation to your tax liability. For those who have to make such payments, one instalment falls due on 31 January within the tax year, which is usually half the tax due for the previous year. On the following 31 July (after the end of the tax year) the second payment on account becomes due and is normally the same as the first instalment payment.

The second payment on account for 2007/08 is due by 31 July 2008. If this is not paid on time then interest will start to accrue on the unpaid amount. The tax authority usually notifies taxpayers or their advisers that this second payment is due.

It is possible to reduce your payment on account if you believe that the income for the current year will be less than last year. There is a specific form required for this that has to be submitted to Her Majesty's Revenue & Customs (HMRC). Care needs to be taken in reducing a payment on account because if it is incorrectly reduced interest and possibly penalties will be due.

5% surcharge

You should have paid your income tax liability for 2006/07 by 31 January 2008. Any unpaid tax and Class 4 National Insurance for 2006/07 outstanding at 28 February 2008 would have attracted a 5% surcharge. If there is any tax or National Insurance for 2006/07 outstanding at 31 July 2008 then this will attract a further 5% surcharge.

So, for example, if you had a tax liability of £10,000 due on 31 January 2008 and you paid £7,500 on time, with the balance still outstanding at 31 July 2008, then you would have received a surcharge of £125 (5% of £2,500) on 28 February 2008 and a further surcharge of the same amount will be charged on 31 July 2008. This surcharge is in addition to any interest that will also be accruing and any penalties due if you did not submit your return on time.

Late filing penalty

A second late filing penalty of £100 will also become due on 31 July 2008 if you have not submitted your 2006/07 return by that date.

What do you need to do if you receive tax credits?

If you are in receipt of tax credits and haven't already done so, then you need to renew your tax credits claim by 31 July 2008 or your payments will stop. In addition, HMRC says that if you have not renewed by the deadline you may be asked to pay back any overpayments from last year and any payments made to you since 6 April 2008.

HMRC should have sent you a renewals pack which would may have included both an Annual Review notice and an Annual Declaration form. If you received both of these in your pack then you need to provide HMRC with the information requested so that your tax credit payments for last year can be checked and so that HMRC can calculate your entitlement going forward.

If you only received the Annual Review notice (either because you receive a 'nil award' or because you only receive the full family element of the Child Tax Credit) then you only need to contact HMRC if the details on the notice are incorrect.

You can contact HMRC either by completing the forms in your renewal pack or by calling the Tax Credit Helpline on 0845 300 3900. The Helpline is available from 8.00am to 8.00pm, seven days a week.

Francesca Lagerberg, Head of the National Tax Office at Grant Thornton says: "HMRC is currently consulting on the penalty structure for the late filing of returns and late payment of tax with a view to ensuring that the penalty regime is an effective deterrent against late filing and late payment. A new system could include higher penalties for taxpayers who repeatedly file and pay late as HMRC attempt to crack-down on 'serial' offenders."

Please click here to contact us if you would like further advice on any of the issues raised above.