Extreme busyness goes with the territory of clinicians when they are occupied with their NHS commitments, private practice and other roles. As their careers progress, it is likely their tax affairs will become more complex and it is easy to miss some vital dates. That can be financially costly as well as increasing the chance of a HM Revenue and Customs (HMRC) inquiry.
Partner, Richard Norbury covers some of the more common tax deadlines you will face during your career
Individuals
Most readers will surely be familiar with the tax return deadline of 31 January. In recent years, this has been extended to 28 February due to Covid.
But it is expected that the usual 31 January deadline will now be enforced in future. The majority of consultants and GPs will be required to prepare a tax return by this date.
Here are few of the most common reasons why you might need to submit a personal tax return:
- Untaxed income received – for example, self-employed earnings/ dividends/property income/partnership profits;
- Taxable earnings in excess of £100,000;
- Declaration of annual allowance pension tax charges.
Property income
Income received from properties, both in the UK and abroad, are subject to tax. Again, allowable costs can be offset to arrive at the taxable profit figure.
If you own the property with other parties, you need to declare your share of the income and expenditure.
If you have a mortgage on the property, you are able to claim some tax relief on the interest payments made during the year, although this is no longer a full deduction against your taxable profits.
From 27 October 2021, if you were to sell an interest in UK residential property that has ever been a rental property, then you have 60 days from the date of conveyance to report your disposal and pay any tax due. You will be subject to late filing penalties and interest if this deadline is missed.
If the residential property is held jointly, each owner is required to submit their own in-year return. The new regime is aimed at the property owners, not the property itself.
This could also apply to a sale of residential property following a gift, transfer in or out of a trust or a transfer as part of a divorce settlement.
If you sell your own home, then this is likely to be covered by your principal private residence (PPR) waiver and thus would not be caught by these rules.
Personal tax liability payment due dates
Tax is payable on or before 31 January each year. If you pay more than 80% of your tax via Pay As You Earn (PAYE) or if the total liability for the year is under £1,000, then this is likely to be the only liability you need to pay.
However, if you do not qualify for either of these exemptions, then you will be required to pay a payment on account by 31 July each year in addition to the 31 January payment.
The payment on account is based on 50% of your previous tax liability. If your profits have reduced significantly, you may be in a position to review these payments on account and reduce them accordingly.
If you delay payments of personal tax, then HMRC will charge pro rata interest at 3.75% at the time of writing this article.
If you delay your January balancing payment by 28 days, then you will be subject to a 5% surcharge based on the tax outstanding.
Failure to file a personal tax return before the 31 January attracts an automatic penalty of £100 and this rises when three months late.
You can pay your tax liability through your PAYE tax code as long as all of the following apply:
- Less than £3,000 is owed on your tax bill;
- You already pay tax through PAYE – for example, you’re an employee or you get a company pension;
- A paper tax return is submitted by 31 October or your online tax return online by 30 December.
‘Scheme Pays’ election
Many independent practitioners will be subject to pension tax charges based on the annual growth of their pension. This is a complicated area and has been covered in previous articles in Independent Practitioner Today and will be revisited in the future.
If you choose to apply for NHS Pensions to pay the annual allowance tax charge, then the deadline for submitting your scheme pays election is 31 July following the end of the tax year. For example, if you have a tax charge for the year 2021-22, then you have until 31 July 2023 to apply for the scheme to pay the tax.
There is an appeal process available in certain circumstances; for example, a delay or error in the figures from NHS Pensions.
This is a complicated area and a specialist medical accountant can help calculate any tax charge and offer advice.
Limited companies
Company year-ends often do not coincide with the usual 31 March/5 April tax year.
The year-end is usually based on the month the company was originally formed, but it is possible to change the company year end.
The company has four main deadlines each year:
- Filing accounts with Companies House;
- Filing tax return with HMRC;
- Paying corporation tax;
- Filing a confirmation statement.
The deadline for filing limited company accounts is usually nine months after the year-end date unless you are preparing your first year of accounts or have altered the year-end at Companies House.
Failure to file your company accounts on time results in a penalty of £150 if filed within one month of the required date, rising to £1,500 for over six months late.
These penalties are doubled if you file late in two successive financial periods.
The company tax return deadline (form CT600) is 12 months following the year-end. If the period of reporting is longer than 12 months, then you may be required to file a CT600 soon after the period end.
Even though you usually have 12 months to file a CT600, the payment of tax is due nine months and one day after your period end. For longer accounting periods, this can lead to two separate payments of tax which may be in quick succession. Interest is charged on late payments.
The company is required to file a confirmation statement confirming details including directorships, registered office address, structure and people with significant control. This is usually due two weeks after the anniversary of the date the company was formed.
Various other deadlines apply to companies, such as you have 14 days to report an appointment of a change in office holders – mainly directors and company secretaries.
It is best practice to inform your accountant of any changes that you are planning to make so they can ensure you meet your reporting requirements.
Properties within companies
With the changes in the allowable mortgage interest and stamp duty in recent years, many companies now have property portfolios within a limited company.
Some companies will own residential properties. If any of the properties are valued above £500,000, then you may be subject to the Annual Tax for Enveloped Dwellings (ATED).
Normally you need to submit your return:
- By 30 April if your property is within the scope of ATED on 1 April;
- Within 30 days of acquisition if your property comes within the scope of ATED after 1 April;
- For a newly built property, within 90 days of the earliest of the date your property becomes a dwelling for council tax purposes or when it is first occupied.
Certain exemptions are available, meaning you may not have a tax charge. However, qualifying properties will need to submit a return each year to remain compliant.
Partnerships
It is more common than ever that consultants will be involved in a partnership or limited liability partnership (LLP).
For an LLP, the filing deadlines at Companies House apply in much the same way as a company as explained earlier in this article. The subtle change is that, instead of directors and company secretaries, an LLP will have members and designated members.
However, as an LLP is taxed as if it is a traditional partnership, there is a requirement to submit a partnership tax return to HMRC by 31 January each year.
Failure to submit can lead to £100 penalty per partner plus £100 for the partnership tax return.
In addition, assuming the figures were not finalised, then this will prevent you from filing your own personal tax return, so failure to submit can be expensive, especially in large partnerships.
VAT
For those doctors who are VAT registered – which will, in the main, be due to medico-legal work – you will be well aware of the deadlines, as these are much shorter than those imposed on tax returns and accounts.
The vast majority of businesses are now required to file their VAT returns online.
The online filing deadline and payment of VAT are the same date being one calendar month plus seven days.
However, if you are on the annual accounting scheme – essentially you prepare a 12-month VAT return and pay payments on account during the year – then you have two months after the year-end to file the return.
Penalties for late payment of VAT are complicated and based on a surcharge system where you enter a ‘probationary period’ for 12 months and if you are late again, you are subject to a charge for a percentage of the VAT liability outstanding.
Making Tax Digital
Many doctors have heard of the Government proposals to introduce Making Tax Digital over the next few years.
HMRC aims to create one account for each taxpayer for all of their individual taxes. This will involve quarterly filing of returns and possibly payments on account for businesses and landlords.
The implementation has been delayed due to the pandemic, but the latest proposed dates are as follows:
- VAT – already implemented;
- Self-employed businesses, including landlords – from April 2024;
- Partnerships – from April 2025;
- Corporation tax – from April 2026.
Some exemptions may be available if your turnover is below £10,000 a year, but these businesses may be introduced to the rules in the future.
Bearing this in mind, it is more important than ever that you have robust systems and accounting software that is fit for purpose.
There are many pitfalls that can result in significant financial loss and stress and specialist medical advice can help you to navigate these to ensure you meet the required obligations.
Written for the October 2022 issue of the Independent Practitioner Today.
