Watch out if you are an expat with earnings or rents in the UK – an important tax deadline has just passed that could mean paying interest and penalties.
Expats filing a self-assessment return with HM Revenue & Customs have two tax deadlines to meet every year – January 31 and July 31.
And the second is often forgotten as many taxpayers are on holiday.
Self-assessment is sometimes a complicated way to pay income tax for contractors and landlords.
Balancing and advance payments
HMRC takes a balancing payment in January to top-up too little tax paid in advance for the year or to refund any overpayment.
Alongside the balancing payment are two payments in advance for the following January’s self-assessment filing. These advance payments are both for the same amount and due in January and July.
The rule of thumb is someone who has £10,000 due in income tax from earnings, rents or other sources on January 31, 2017 pays £5,000 in advance of their 2016-17 tax bill with the balancing payment/refund and another £5,000 for HMRC on July 31.
HMRC does send out payment reminders but will add interest to late payers and then more penalties – including a 5% surcharge on the bill if paid just one minute after the midnight deadline on July 31.
That example of £5,000 due then becomes £5,250 plus interest charged at 2.5% a year or 0.006% a day.
If expats have a reasonable excuse for missing the payment in advance, they can appeal to HMRC to delay the deadline, but the ‘special circumstances’ rules are strictly applied.
Serious illness or bereavement of a close family member are accepted, but not having the money to pay is normally considered a ‘flawed’ excuse and HMRC will press for non-payers to borrow the cash to settle their bill.
Mike Warburton of accountants Grant Thornton said: “Less publicity surrounds this deadline, so don’t forget to pay on time. Missing the January deadline means they still have a month to pay before surcharges are added, but no similar grace period applies in the summer.”