If you are self-employed and you have received a letter from HMRC, it is likely to be about one of the following three issues: your personal tax affairs, your National Insurance contributions, or something more serious. If you are a limited company director you may have received a letter about the notice of your corporation tax submission. Don’t panic! As majority of the times, the letter is about HMRC’s generic notice on your tax affairs such as your tax code, your tax return reminder or tax payment.
Please note whenever you receive a letter from HMRC, always double check if it is genuine by calling HMRC helpline on 0300 200 3300 or by contacting an accountant near you.
If you are just like everyone else and have no idea what all these jargons stand for, then this article is for you. It covers each of the above areas in simple terms so that you know exactly what to do if you get one of these letters.
Let’s start with your tax affairs first:
If you are self-employed then HMRC send a reminder annually to file your tax return on time. It does not mean that you have passed your deadline or you have made a mistake. If you are self-employed you will receive these letters by default. However, if you have an accountant we would recommend to forward this letter to your accountant. A letter from HMRC may be the result of a mistake on your part or it could be that you have failed to declare some of your taxable income. Most people know that they should be declaring their income and paying the appropriate amount of tax but just aren’t sure where to start. If this is you, then a letter from HMRC is not a sign of you doing something wrong, it is a sign that you need to get your act together and start doing things the right way. This is often a sign that you have failed to report all your income. If you have received a letter from HMRC about your tax, then you need to contact them and let them know about the error. Do this as soon as possible so you don’t get charged interest on any unpaid tax.
If you receive a letter about changes to your tax codes it means HMRC made an adjustment of the underpayment/overpayment of your income tax. You just need to forward the letter to your employer or to your accountant. You can also contact HMRC helpline on 0300 200 3300 for further help. If you have a graduate or undergraduate loan you will receive letter OCA300 — repayment of Student Loan deductions.
The system for calculating NI contributions is a lot more complex than that of income tax. You will also be paying a different amount depending on your age and whether or not you are working or self-employed. If you have received a letter from HMRC about your National Insurance contributions, then it is likely that you have made a mistake when calculating your contributions. This can be caused by a number of reasons, including: You have been working and earning more than you have reported – You have been self-employed but have not been paying your NI contributions – You have been receiving benefits (like income support or disability benefits) that are taxable and have not been reporting these. It’s important to note that if you have received a letter from HMRC about your National Insurance contributions, it does not necessarily mean you have done anything wrong. It just means that you have made a mistake when calculating your contributions. To correct your mistake, you will need to fill in a form and send it to HMRC. It’s worth noting that HMRC are not forgiving if you have made a mistake with your National Insurance contributions. Any underpayments will be taken from your next payment, leaving you with less in your pocket.
This is the one you want to avoid at all costs. If you are in any way involved in employment/self-employment and have received a letter from HMRC about underpayment of employment/self-employment or a fraud or a tax fraud, it’s best to get in touch with them as soon as possible. HMRC can also send a letter asking you to payback the underpayment. In this case, you can make the outstanding payment or appeal against the penalty notice. If the case is very serious then HMRC can ask for the evidence and they will also be able to look through your bank statements and other accounts that may be linked to your name tax investigation. We would recommend to find a tax advisor for further help. It is very important to respond to this letter as soon as possible as, generally, they have a deadline. You can also contact HMRC helpline on 0300 200 3300 further help.
You receive a letter from the tax authorities and your heart sinks. You have no idea what they are talking about, but you can guess. It sounds like a tax bill. The scary kind that comes with penalties and interest. And stress. The last thing you need is another expense at the end of the year, but it looks like you’ve opened Pandora’s box by failing to file your taxes for your corporation. It feels like a punch in the gut, but now is not the time to panic or think about running away and hiding under a rock somewhere until this blows over (highly unlikely). There will be consequences (read: more money out of your pocket) if you don’t take action now. Here are some things you should do immediately when you get a corporation tax notice.
Read 15 Ways to Reduce Corporation Tax
The first thing you should do when you get a corporation tax notice is to read it carefully. The notice will include instructions on what you need to do to respond. Generally, the letter will be about the corporation tax reminder. You do not need to take any immediate action. If the letter is about your corporation tax penalty notice then you need to respond to the notice, otherwise HMRC will take action against your business. It is important that you take action immediately, to avoid the interest and penalties increasing over time. You can also find a tax accountant who can help you to deal with HMRC correspondences.
If you received a penalty notice because you failed to file your corporation taxes, you will have two options; you can either pay it or appeal against the tax penalty. If you wish to appeal then you need to gather the records that you do have and ensure that you have them organized so you can easily find what you need when you’re ready to file the appeal against the decision. If do not wish to appeal against the decision then we would recommend to pay what is owing at once as soon as possible. You may need to prioritize which taxes to pay first, depending on the rules and the penalty. You may also be able to make arrangements with HMRC to repay your debts over time.
As a director of the company it is your responsibility to prepare and file your corporation tax (CT600) return. Corporation tax preparation is complicated and if you are not sure which corporation taxes you have to file or if you have no idea how to complete the paperwork, you need to find a tax advisor. Tax advisors specialize in the corporation taxes and can help you complete the filing correctly and avoid penalties and interest. You can also contact Tax Care Accountants to get free tax advisory.
If you receive a notice because you failed to file your taxes, you can either pay the penalty or appeal against it. We recommend to respond to the letter as soon possible. If you are to appeal against the corporation tax penalty then you can do so by completing the form and send it via post. In the letter, you should explain why you did not file on time and how you plan to correct the situation going forward. If you received a notice because you failed to pay your corporation taxes, you might have the option to pay the amount owing by instalments. To do so, you will need to contact HMRC corporation tax helpline on 0300 200 3410 explaining why you cannot pay the full amount at once. You should also include payment for any interest and penalties, if applicable.
If you have received a letter from HMRC, make sure check if the letter is genuine. It is important to know what it is about and what action you need to take as a result. Most of the time HMRC letters will be regarding a reminder or a general notice. Some letters will be regarding a simple mistake that you need to correct, others will be more serious and could have serious implications for your financial future. There are lots of resources available to help you understand the different letters that you may receive from HMRC. If you have received a letter from HMRC, it’s always best to get in touch with them as soon as possible or find a tax expert so you can clear up any issues and move on that.
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