Most tax payers are not required to complete a tax return, because they're either employed and the PAYE system collects the correct amount of income tax; or their income is less than their annual personal allowance - £7,475 for the year to 5 April 2012 - and so not liable to income tax.

However, under the self-assessment system of taxation, it is the taxpayer's responsibly to notify HM Revenue & Customs (HMRC), if he/she has a liability to income tax, which is not being collected via the PAYE system.

This can arise if untaxed income such as rent or gross interest is received, or a higher rate tax payer has significant investment income; or he/she is liable to capital gains tax as a result of the sale of an asset.

Notification must be made to HMRC by 5 October following the end of the tax year. Failure to notify HMRC can result in having to pay a penalty.

If a self-assessment tax return is issued, it must be filed with HMRC by deadline, otherwise an automatic late filing penalty will be charged. The filing deadlines are:

• 31 October following the end of the tax year, if you're submitting a paper return
• 31 January following the end of the tax year, if you're filing online

Tax due under self-assessment is payable in January and July each year. Interest and surcharges are charged if tax is paid late. As the system is self- assessment, it's the taxpayer's responsibility to pay the correct amount of tax at the right time. HMRC may not necessarily issue a demand for the tax at the appropriate time.

HMRC has until 12 months after the tax return has been filed to raise an enquiry into it.

Penalty regime

With effect from 6 April 2009, HMRC introduced a new system of penalties when an error is made in a tax return.

The aim is to crack down hard on those who don't take care with their reporting. The more serious the error or omission, the higher the penalty. If you discover you've made an error in a return that's been submitted, you must inform HMRC. If you don't, and it's discovered later, you'll be charged a penalty for carelessness.

Other areas of expertise/types of claim

• Capital gains tax planning
• Inheritance Tax advice 
• Trust administration and taxation

Why use Access Legal from Shoosmiths?

We can prepare your tax return for you and file it online. We'll advise you of the tax due and timing of payment.

Our experts

Carole Clarke, Chartered Accountant and a member of the Institute of Chartered Accountants of England and Wales

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