Staying on top of tax regulations and guidelines is crucial for anyone running their own business. But what happens if you forget about filing your taxes, such as your self-assessment or VAT return? This article will look at the following areas:

  • What happens if I forget to file my self-assessment tax return? 
  • What happens if I forget to file my VAT return? 

What happens if I forget to file my self-assessment tax return? 

Should I be sending a self-assessment?

You must send a self-assessment tax return if, in the last tax year you were:

  • Registered as self-employed, even while employed by another business, and earned more than £1,000 on top of your salary from self-employment income
  • Self-employed as a ‘sole trader’ and earned more than £1,000
  • A partner in a business partnership

You won’t need to send a return if your only income is from wages paid by an employer, benefits or a pension. But you should send one if you have any other untaxed income, such as:

  • Income from renting a property
  • Tips or commission payments
  • Income from savings, investments and dividends
  • Foreign currency income

How do I submit the self-assessment

Once you are registered to fill in a self-assessment, you can send your tax return online using the HMRC portal or paper forms (but the deadline is earlier).

When is the self-assessment deadline?

Here are the deadlines you need to be aware of when filing your tax returns:

  • You must register to submit a self-assessment by the 5th of October.
  • Paper form tax returns must be submitted by the 31st of October.
  • Online returns must be submitted by the 31st of January.
  • You must pay your tax bill in full by the 31st of January.

For each deadline, you have until midnight on that day or you could face penalties.

What are the penalties for missing the self-assessment deadline?

If you miss the self-assessment submission deadline you will incur a late filing penalty of £100. If you submit your tax return and pay your final bill within the three months after the deadline, you will be charged interest on the late payment as well as your £100 fee.

If you pay later than three months late or do not pay your bill on time, the penalty fee will be higher than £100, as well as being charged interest on the amount of your tax bill that you owe HMRC. HMRC has a calculator to help you estimate how much your penalty charges will be which you can find here

You can appeal penalty charges if you have a ‘reasonable excuse’ for not submitting your taxes on time. HMRC states that reasonable excuses are:

  • Your partner or close family member died shortly before the deadline for filing.
  • You had an unexpected hospital stay which meant you couldn’t access your records to submit the return.
  • You suffered from a serious or life-threatening illness or accident.
  • The software you use to manage your accounting failed just before the deadline, despite you maintaining the records in it (meaning the failure wasn’t due to your neglect, or not updating it).
  • HMRC’s self-assessment portal has technical issues, preventing you from submitting the return on time.
  • Fire, flood or theft stopped you from submitting on time.
  • Your delay in filing is in relation to a disability.

What happens if I forget to file my VAT return? 

Businesses with a turnover of £85,000 or more are legally required to register for VAT. If your business meets the £85,000 threshold, or you have voluntarily registered, then you must submit VAT returns every three months, via the HMRC website portal

To find your VAT deadline for submission and payment, you can find it on your HMRC VAT online account.

If HMRC doesn’t receive your return by the deadline, or if you don’t make the full payment of your VAT bill by the date required, then you will be issued with a ‘default’ on your HMRC account. For your first default then you will not be issued with a penalty fine. Afterwards, you may enter what is called the ‘surcharge period’.

What happens on your first default?

HMRC makes an exception if this is your first late payment for your VAT. In the twelve-month period following, you may not accrue any surcharges (extra fees) at all. HMRC will instead send you a reminder letter advising you that the VAT you owe is late and that you’ll need to pay what you owe, and if you do not make full payment after the warning then HMRC will take further steps to obtain payment.

If your turnover is over £150,000 then you are only provided one ‘grace’ period for any late VAT bills, without surcharges. Smaller companies with less turnover are offered support to pay, and if they incur a second default they are issued with a Surcharge Liability Notice.

What happens after your second default?

If you are late again, you’ll get a second default. For businesses with less than £150,000 turnover, you will then be placed in the surcharge period for a year where you will be charged interest on your owed VAT amount. If you miss another deadline in that year then your surcharge period will be extended by another year where you will continue to build up charges on every VAT payment you make. 

When the charges start to build up, or longer if you miss more deadlines, your VAT bill will continue to rise. The added extra percentage charges on top of the bill you owe can make paying very difficult to manage.

You can ask an accountant to file your tax returns for you, whether it is for VAT or your self-assessment. You need to give them authorisation through HMRC to submit this information for you, but this could help if you are finding it difficult to manage the tax obligations of your business.

Make tax returns easier with a simple app 

By setting up a Countingup business current account, you can manage all your financial data in one place. The app comes with free built-in accounting software that automates the time-consuming aspects of bookkeeping and taxes. 

You can view real-time insights into your business’ finances, such as cash flow and profit and loss statements. The app provides running tax estimates so that you always know how much to set aside for your tax return. Find out more here.