HMRC phone line 'in chaos' ahead of tax return deadline

HMRC's phone line "descended into chaos" yesterday, the eve of today’s deadline for online tax returns, says The Times.

A technology failure cut callers off before they received their transaction numbers, leaving them "uncertain whether tax payments had cleared", the newspaper added.

Growing numbers of people now file an online return on HMRC's website.

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Unlike paper returns, which have to be filed in October, the deadline is the last day in January, which is also the date any tax owing must be paid.

"More than 11 million Britons are required to complete a self-assessment tax return each year [but] as many as 400,000 are expected to wait until today’s deadline to submit their form," says the Times.

While HMRC issues an immediate £100 fine for missing the midnight deadline, even by a matter of hours, it said those affected by the phone line failure would not face a penalty.

The paper also reports figures obtained under the Freedom of Information show the taxman issued a record number of financial penalties last year.

"HMRC imposed 143,000 penalties last year on people who filed inaccurate information because it deemed them not to have taken 'reasonable care' - nearly three times the 55,000 fines levied in 2012," it says.

While it said punishment is reserved for inaccurate returns, where people have failed to do their best to remove any errors, the regulator waived 72,000 of those fines following criticism by a tribunal. The number in 2012 was just 12,000.

The First Tier Tribunal "ruled that penalties should be used only when they were needed to encourage a change in behaviour".

Mistakes included failure to declare savings income or benefits in kind, including company cars. There was also a six-fold increase in the number of people deliberately misstating their income, reaching 30,000.

For all the details on how to file your online tax return, see below.

Five top tips to help you complete your tax return

12 January

It's that time of year again: the self-assessment tax return deadline is looming and thousands of us are scrabbling to find receipts, bank statements and the money to pay our tax bills. Here are five steps to make the process easier.

1. Leave time to register

The most important thing you need to do is make sure you are registered on the HMRC website. You’ve missed the deadline for filing a paper return (it was 31 October) so you now have to file electronically, but you can’t do that without an electronic log-in.

If you send in a paper form after the deadline, even if you also fill out an electronic return, you could be fined as if you submitted your return late.

In order to register you need to apply for an activation code, which can take up to seven working days to arrive in the post. The deadline is 31 January, after which you'll certainly be facing a finacial penalty if you still haven't submitted. So, if you're not already signed up, do so now.

2. Get your paperwork together

Before you even start trying to fill out your self-assessment take the time to gather all the paperwork you will need first.

This includes your P60 form which shows your income and the tax you’ve already paid - you can get this from your employer. You will also need a P45 if you left your job within the 2015/16 tax year, and a P11D or P9D showing your benefits and expenses if you are employed.

You’ll also need details of any interest your bank accounts have earned, dividends you’ve received and any other income you earned during the tax year.

3. Don’t be afraid to claim expenses

There are plenty of ways you can legitimately reduce your tax bill. The main one is making sure you claim for all the expenses you are entitled to.

For example, if you work from home you can claim for part of the cost of running your home as a business expense, while if you travel you can claim back any petrol or public transport costs that were run up in the course of your work. You can find out more about what expenses you can claim on the HMRC website.

4. Consider using an accountant

If the paperwork and your stress levels are mounting consider getting professional help. An accountant should charge between £100 and £200 to sort out your tax return for you, but if you are facing a large tax bill that could easily be recouped by an accountant filling out the forms correctly and bringing down your bill.

You will also have peace of mind that your return is correct and the taxman isn’t going to come looking for you.

5. Make sure you pay!

Once you’ve filed your return don’t forget to pay the bill. You have to pay your tax bill by 31 January, the same day as the return needs to be filed – and that’s the money arriving with HMRC by that day, not leaving you so pay it a few days early to give it chance to get there.

If you don’t – even if you are only a matter of hours late – you’ll be fined £100. After three months you’ll face a daily fine of £10 up to a 90 day maximum. At six months you’ll have another £300 or five per cent of the tax due, whichever is higher, added to your fine.

If you're self-employed earnings are above £1,000, you'll have already paid your second installment towards this year's bill back in July. By the end of this month you'll need to settle any balancing payments and pay the first half of next year's estimated bill, which the website will estimate for you.

Tax return: Everything you need to know

25 October

If you are one of the estimated ten million people who needs to fill in and file a self-assessment tax return and you prefer to do so on paper, the deadline is fast approaching.

For many people the quieter summer period is a good time to catch up on paperwork – and none is more important than your self-assessment tax return.

Whether you are a small business owner, a freelancer, or on a six-figure salary you'll need to fill out a tax return, with penalties for late submission starting at £100 and running potentially into the thousands of pounds.

When is the deadline for filing?

For paper returns, the deadline for filing your return for the 2015/2016 financial year is midnight on 31 October. If you miss this or would prefer to submit electronically, the online deadline is 31 January 2017.

It's worth noting, says Which?, that if you miss the paper deadline you must not post back the form, even if you do an online return as well. You'll be deemed to have submitted late and will be subjected to a fine.

When will I have to pay?

All taxes due must be paid by midnight on 31 January 2017.

If your last bill was over £1,000, though, you would have been required to make your second payment on account by 31 July. When you file your return, you'll pay half of next year's bill and any "balancing payment" that is calculated to be outstanding on the previous year.

What are the penalties?

There're pretty hefty. Miss the deadline by one day and you'll get a £100 fine – and you'll then have up to three months to get your submission in. If you miss this you'll be fined an additional £10 a day up to 90 days, meaning a penalty of £1,000 by the time you hit the six-month mark. After that it's another £300, or five per cent of the tax due, for each subsequent three months.

If you go over one year, you will be fined up to 100 per cent of the tax due, effectively doubling your bill.

Are fines ever waived?

Yes, but you'll need a good excuse. This includes things like the death of a partner, a prolonged stay in hospital, or a computer failure at HMRC.

Who needs to fill out a tax return?

Anyone who is self-employed, or who does freelance work alongside a main PAYE job, as well as anyone who earns over £100,000, or over £50,000 if they or a partner claim child benefit.

The BBC says the number of people needing to file a tax return has surged thanks to the surging "gig economy", where people work in their spare time in a self-employed capacity, for example as taxi drivers for companies like Uber.

It reckons around ten million people will be expected to submit a return – and of these one in ten is likely to do so in paper by the October deadline.

What are my allowances?

You don't need to worry about these when you fill the form out, as HMRC will work it all out for you based on details of your earnings. If you fill out the form online you'll get a provisional estimate of your bill immediately, with a final calculation after three days.

For reference, though, you don't pay income tax unless you earned £10,600, 40 per cent tax kicks in at £42,385, and 45 per cent at £150,000.

That £10,600 personal allowance is tapered away – reducing the 40 per cent threshold at the same rate – when you earn more than £100,000. This means anyone earning above this level pays the higher-rate band on more of their earnings – and it's why you need to fill out a return when your earnings hit this level, as you'll need to pay back the tax relief you've already received.

Similarly, child benefit is reduced for those earning £50,000 and removed completely for anyone with an income above £60,000. So at these levels parents claiming benefits need to submit a form.

If you're self-employed you'll need to pay class two national insurance contributions of £2.80 a week, but you can apply for a "small profit exemption" if you earned less than £5,965. If you just do a little bit of freelance on the side, the exemption applies only to your self-employed earnings.

All of the details on allowances for last year can be found here.

What do I need to declare?

You have to report everything you’ve earned over the tax year from 6 April 2015 to 5 April 2016. This includes income from employment, self-employment, property and interest, and gains on your savings and investments.

Even if all your savings and investments are in Isas you still have to declare them, despite the fact no tax should be due.

Remember to claim for business expenses to reduce your bill, too. If you are self-employed you can claim a whole host of expenses from energy costs if you work from home to stationary and travel costs. You can even expense a portion of your mortgage interest if you are a landlord.

What will I need in order to fill out my return?

Before you start trying to fill out your form make sure you have all the paperwork to hand. You will need:

• a P60 form from your employer showing your income and the tax you've paid on it;
• a P45 if you have left a job within the tax year;
• a P11D or P9D detailing benefits and expenses;
• plus details of interest on bank or building society accounts, dividends from investments and any other income you receive.

Anything else?

If you want to file online, you'll need to apply for an online account if you haven't done so already. It can take up to seven days to get your activation code through, so don't leave things too late and get caught out.

It's also worth noting that from this year the government has put in place minimum technology standards on its online system. For example, Windows machines that use an iteration of its browser software up to and including Internet Explorer 8, you'll need to update.