UK tax return filing requirements
HMRC – Her Majesty’s Revenue and Customs – do not require the vast majority of people living in the United Kingdom to complete a UK tax return each year, but rather their income tax is simply paid and adjusted through the individual’s PAYE (Pay as You Earn) tax coding. The general rule is that should HMRC send you a tax return you are obliged to complete and return this to them. Failing to do so promptly may result in late filing penalties.
However, individuals with more complicated affairs; those with income not taxed at source e.g. savings, investments and property, those individuals earning approximately £100,000.00 or more, as well as those who are new to the UK, are likely to have to complete a UK tax return. Do you need to complete a tax return?
HMRC : Residence, Domicile and the Remittance Basis “RDR1”
HMRC published guidance in this area provides an overview of the liability of residents and non-residents to tax in the United Kingdom. The main UK residency statuses and the concept of domicile are explained. Please note this is the Revenues own guidance and not legislation. We would be pleased to advise on non-residence and domicile issues that may arise. Download RDR1
HMRC : Statutory Residence Test “SRT”
A new statutory residence test has applied in the UK since 6 April 2013. We would be pleased to advise you on your UK residency position and how to manage the position with reference to the SRT.
For those unfamiliar with the system, the UK taxation regime can, at first, appear rather daunting. Not only does the UK tax year run from the 6th April to the 5th April each year (rather than a more “usual” calendar year), but there are also numerous “residency” statuses to contend with. This is, of course, in addition to the fact that the concept of “domicile” is integral to the UK system of taxation.
It is imperative that on arrival in the UK, foreign nationals correctly inform HMRC as to their domicile status as well as their intended length of stay in the UK. These actions allow new arrivals to ensure that they benefit from various more advantageous tax regimes than those afforded to a UK resident and domiciled taxpayer.
Leaving the UK
Form P85 should be filed to inform HMRC that you are leaving the UK, however it should not be completed by taxpayers who file a UK Tax Return. You will naturally need to file a UK tax return for the year of departure, however it is worth noting that your liability to UK tax does not necessarily cease on your day of departure. Income arising in the UK continues to be taxable even if you become a non-resident. For this reason it is worthwhile obtaining advice on how to rearrange your personal assets to ensure the most beneficial tax treatment (click here for more information on the P85).
The range of advice we can offer includes, but is not limited to, the following:
- Use of international pension plans to help reduce tax within the UK
- Specific UK tax planning catering to the individual’s particular circumstances
- UK PAYE/NIC advisory and consultancy services for companies setting up in the UK
These have changed slightly for tax years from April 2008 and these adjustments should be noted:
- Deadline for submission of Paper Tax Returns
- Deadline for submission of Online Tax Returns
- Balancing Tax Payment due for both paper and online submissions
- First Payment on Account due for following year (if applicable)
- Second Payment on Account due for following year (if applicable)
Penalties for non-compliance
Late Filing Penalties:
- Day one: you will be charged an initial penalty of £100, even if you have no tax to pay or you have already paid all the tax you owe
- Three months late: you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
- Six months late: you will be charged further penalties, which are the greater of 5 per cent of tax due or £300
- Twelve months late: you will be charged yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases you face a higher penalty of up to 100 per cent of the tax due
Penalties for paying your tax late:
- Thirty days late: you will be charged an initial penalty of 5 per cent of the tax unpaid at that date
- Six months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
- Twelve months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until your payment is received.
Please contact us to speak to one of our advisers.