Chapter 6 - Tax Compliance & Self-Assessment

Question 1

Self-Assessment - Activities that can be carried out online;

- codes, tax return, refund, manage, address, employment and affairs

Answer 1

• review PAYE codes
• completing and viewing SA tax return
• claim tax refund
• viewing and managing tax forms
• updating marriage allowance
• change address
• update any employment benefits
• allow someone else to manage tax affairs on their behalf

Question 2

Who is within SA (4, straightforward)

Simple assessments - what is it and used when

Tax liabilities paid under SA (4)

Answer 2

• mainly self-employed, directors , liable to tax via property income, declare high income child benefit charge or need to pay additional tax

Simple assessments;

• collect tax without bringing into SA system
• only used if tax payers affairs are straightforward and enough info

Tax liabilities paid under SA;
- income tax, class 2 & 4 NICs and CGT

Question 3

Tax payments - when are they paid (3), do not need to make payment when and payments include (2)

Balance payments include (3)

E.g. - £20k for 20/21 and £26k for 21/22

Answer 3

• First payment due 31/01 that tax year, second 31/07 then final payment payable 31/01 following tax year.
• do not have to make payment on account if balance is less than £1k
• these payments include C4 NICs & HICBC

Balance payment;
- includes C2 NICs, CGT and student loan repayments

31/01 - £10k
31/07 - £10k
31/01/23 - £6k

Question 4

Tax payments - Interest and Penalties;
- when charged, overpayments, interest rates for pens and over, charged from when, reduction unjust, 5% pens paid when (2), £100 fixed sum when, if 6 months late, if >12 months late, variable, mistakes and arrangements

Answer 4

Interest & Penalties

• auto charged interest and penalties on late payments
• HMRC pays interest on tax overpayments - linked to BoE base rate
• late payment interest rate 2.6% and overpayments is 0.5%
• charged from date due
• interest charged if reduction unjustified
• 5% penalty levy for tax unpaid in more than 30 days + another 5% if 5 months
• £100 fixed sum for any return not submitted by 31/01
• if 6 months late, charge of £300 + further 5%
• if more than 12 months late, max penalty up to £1.6k
• variable penalties for record keeping etc
• penalties for mistakes in tax due
• if unable to pay tax on time, can make temp arrangement with HMRC

Question 5

Reduction in payments on account;

• claim when and can arise (3)
• can amend SA when

Answer 5

Reduction in payments on account

• can claim reduction in payments if they will overpay on tax
• this can arise due to lower income, higher deductions and higher proportion of tax deducted at source
• taxpayers can amend at any time post 12 months after 31/01

Question 6

PAYE - employers responsibilities, what collected through this, code and RTI

Answer 6

• employers must deduct income tax and employers NICs under PAYE from all payments to employees and directors
• C1 NICs also collected through this
• the PAYE code is designed to deduct correct amount of tax from employee without the need to complete a tax return
• RTI - employers must send real time information to HMRC every time employees paid