Individual returns, records and payments
Finance Act 2025 · 2025/26
1 Self-assessment and responsibilities
In this TX lecture: Reducing payments on account, compliance checks and discovery assessments, and late-payment interest calculations are not examined in FTX.
2 Due dates for payment
The responsibility for providing the information to calculate the tax liability of the taxpayer and making the payments lies with the individual and this information must be submitted on a self-assessment tax return (see the return-completion section in this chapter). For many taxpayers they will only have employment income, for which Income Tax and Class 1 NIC will have been deducted at source through the PAYE system and no tax return will be required.
Taxpayers with other sources of income must disclose this on a tax return and settle any income tax and Class 4 NIC liabilities along with any CGT liability.
Normal due date
Taxpayers are expected to settle outstanding liabilities by 31 January following the end of the tax year for:
Income Tax
Class 4 NIC
Capital Gains Tax.
Payments on account
Any income tax not collected at source and Class 4 NIC are payable by self assessment and payments on account (POA) may be required (capital gains tax is not included in these POA).
Due dates of the POAs are:
first POA = 31 January in the tax year (31 January 2026 for 2025/26)
second POA = 31 July following the end of the tax year (31 July 2026 for 2025/26)
Each POA = 50% of the previous year’s Income Tax and Class 4 NIC payable by self-assessment
Janice is both an employee and is self employed. Her tax liability for 2024/25 was as follows:
£ | |
Total Income Tax liability | 12,000 |
Less tax deducted at source | (1,000) |
Income tax payable by self assessment | 11,000 |
Class 4 NIC | 2,000 |
13,000 |
For 2025/26 her total Income Tax liability was £14,000 with £2,000 being deducted at source. She had a Class 4 NIC liability of £2,500 and a Capital Gains Tax liability of £1,700.
Show how her 2025/26 liability will be settled and determine the total amount of tax to be paid on 31 January 2027.
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3 Notification of chargeability
An individual who receives a source of income subject to Income Tax must notify HMRC by 5 October following the end of the tax year in which the source arose.
Failure to notify HMRC will result in a standard penalty based on a percentage of tax unpaid on 31 January following the end of the tax year (see “Standard Penalties for Errors” in Rates and Allowances information provided in the exam).
4 Self-assessment tax return
Individuals complete their own tax return. The first part details income and capital gains for the tax year, the second part shows the calculation of the Income Tax liability.
The taxpayer has the choice of filing a paper return or filing electronically online. The dates by which a return must be filed depends on the method used.
All completed and signed paper returns must be filed by 31 October following the end of the tax year (31 October 2026 for 2025/26).
All online electronic returns must be filed by 31 January following the end of the tax year, which is known as 'the filing date' (31 January 2027 for 2025/26)
The 31 October date will also be the deadline for a taxpayer to complete a paper return if they wish HMRC to calculate the tax liability on their behalf. For tax returns filed online a tax calculation is automatically provided as part of the online filing service.
HMRC can amend a taxpayer's self-assessment return to correct obvious errors or mistakes within nine months of receiving the return.
The taxpayer can give notice to an officer to amend his tax return within 12 months of the 31 January filing date regardless of whether the return is paper based or filed electronically (31 January 2028 for 2025/26).
5 Late filing of returns
There will be an initial penalty of £100 if the return is filed after the due date.
If a return is more than three months late then there will be a daily penalty of £10 per day (for a maximum of 90 days).
If a return is more than six months late a further penalty of 5% of the tax due on the return will be charged (subject to a minimum of £300).
If a return is more than twelve months late a further penalty of 5% of the tax due can be charged, although a higher percentage will be charged if the failure to submit is deliberate.
6 Claims
All claims and elections which can be made in a tax return must be made in this manner if a return has been issued.
The time limit for making a claim is 4 years from the end of the tax year, unless a different limit is specifically set.
7 Error or mistake claim
The time limit is 4 years from the end of the tax year to correct errors in a tax return when the tax would otherwise be overcharged, for 2025/26 this will be 5 April 2030.
For 2025/26: notify new chargeability by 5 October 2026; file paper by 31 October 2026 or online by 31 January 2027.
The normal balancing-payment date is 31 January 2027.
Payments on account are not due if the previous relevant amount is less than £1,000 or more than 80% was collected outside Self Assessment.
Exactly £1,000 does not satisfy the less-than exception.
8 Source records and return completion
Pages / record | What to enter and check |
Main return | Tax year, personal details, UK interest and dividends, reliefs and the declaration |
Employment supplement | Gross earnings, taxable benefits, allowable expenses and PAYE from P60/P45/P11D |
Self-employment supplement | Business dates, turnover, allowable expenses, adjustments, capital allowances and taxable profit/loss |
Partnership supplement | Partner’s allocated income/loss and other taxable shares from the partnership statement |
Property supplement | Rent/premium receipts, allowable expenses, replacement relief and property loss |
Capital-gains supplement | Asset descriptions, acquisition/disposal dates, proceeds/costs, claims, gains and losses; calculate CGT separately |
Reconcile each figure to the source document and the computation. Enter the correct tax-year amount, not an unadjusted accounting-period profit. A claim needs the amount, year and relevant relief; explain it legibly.
Keep invoices, receipts, cash/bank books, mileage, payroll/benefit statements, rent records, partnership statements and capital-asset records. Retain business/property records for five years after the filing date; ordinary non-business records for one year after the filing date.
Submit all applicable supplements with the return within the paper/online deadline. Check totals, sign/declaration and retain the submitted copy and payment evidence.
9 PAYE forms
9.1 Year end returns
The employer must send P11D forms detailing benefits provided to employees to both HMRC and the employee by 6 July following the end of the tax year:
The employer must give P60 forms which details gross pay and tax deducted as well as NICs made in the tax year to employees by 31 May following the end of the tax year:
P45 is issued when an employee leaves and records pay/PAYE to the leaving date. Give the relevant information to the new employer. If there is no recent P45 use the current starter checklist; it replaced P46. P60 is due to an employee by 31 May after the tax year; P11D benefits information by 6 July. No PAYE code-number calculation is required.
10 Professional and ethical guidance
Accountants often act for taxpayers in dealings with HMRC. Their duties and responsibilities should be towards both clients and HMRC.
The accountant must uphold standards of the ACCA, that is;
to adopt an ethical approach to work, employees and clients.
acknowledge the professional duty to society as a whole.
maintain an objective outlook.
provide professional high standards of service, conduct and performance at all times.
The ACCA “Code of Ethics and Conduct”
The ACCA “Code of Ethics and Conduct” sets out five fundamental principles which members should adhere to meet these expectations, namely:
Integrity: Members should act in a straightforward and honest manner in performing their work. In acting with professional competence and professional behaviour, members should also be demonstrating tolerance and mutual respect.
Objectivity: Members should not allow prejudice, bias, or the influence of others to override objectivity.
Professional competence and due care: Members have an ongoing duty to maintain professional knowledge and skills. Members should be diligent and act in accordance with applicable technical and professional standards.
Confidentiality: Members should respect the confidentiality of information acquired as a result of professional and business relationships. Members should not disclose any such information to third parties unless:
– they have proper and specific authority, or
– there is a legal or professional right or duty to disclose e.g. money laundering.
Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of members or third parties.
Professional behaviour: Members should refrain from any conduct that might bring discredit to the profession.
11 Dealing with HMRC
A member owes duties and responsibilities to both the client and HMRC.
This entails the following:
Ensuring that information provided to HMRC is accurate and complete.
Not assisting a client to plan, or commit, an offence.
If, in the course of work for a client, any errors come to light, a member should take the following action:
Explain to the client the need to notify HMRC as soon as possible and the consequences of not doing so.
If the client refuses to make full disclosure, the member should set out the consequences in writing and consider whether it is appropriate to continue to act for the client.
If the client still refuses, the member should cease to act, should advise HMRC that the member is no longer acting (without giving the reason why) and consider whether disclosure is required under the Money Laundering Regulations.
12 Payments on account and balances
The final balance, or repayment, compares actual liability net of PAYE with those payments on account.
On 31 January after a tax year, there may be both that year’s balancing payment and the first payment on account for the next year. Show the two amounts separately.
Jaya’s 2024/25 income-tax/Class 4 amount payable through Self Assessment is £4,000. Her actual 2025/26 amount is £5,500 and CGT is £800. Calculate payments due for 2025/26 and on 31 January 2027.
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Kofi’s business records show turnover £45,000, allowable cash expenses £20,000 and qualifying car allowances £1,000. State the amounts to carry into the self-employment pages and main computation.
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13 Interest on tax
13.1 Late payments
Interest charged is not a tax deductible expense for individuals.
In addition, the late payment of the balancing payment of tax will attract penalties as follows:
If tax is paid more than 30 days late there will be a penalty of 5% of the amount due.
Further penalties of 5% will be charged where tax is unpaid after six months and then again after twelve months.
Note:
The penalties only apply to the balancing payment of Income Tax, Class 4 NIC and Capital Gains Tax paid late. Penalties do NOT apply to payments on account.
Interest received from HMRC on a tax repayment is exempt for an individual. This exemption does not make ordinary bank interest tax-free.
14 Penalties for incorrect returns
The amount of penalty is based on the amount of tax understated, but the actual penalty payable is linked to the taxpayer’s behaviour, as follows:
No inaccuracy penalty applies where a genuine mistake occurs despite reasonable care.
A careless inaccuracy can carry a penalty of up to 30% of the understated tax.
A deliberate inaccuracy can carry a penalty of up to 70%.
A deliberate and concealed inaccuracy can carry a penalty of up to 100%. Disclosure can reduce the penalty within the supplied standard table.
A penalty will be substantially reduced where the taxpayer makes disclosure, especially unprompted disclosure, to HMRC.
See “Standard Penalties for Errors” in Rates and Allowances information provided in the exam
HMRC charges late-payment interest and can pay interest on repayments; interest calculations are not examined in FTX.
Incorrect-return penalties depend on behaviour and disclosure, using the supplied standard table. Late-filing penalties are taught above.
Label each payment by its tax year and purpose. A January balance and the next year’s first payment on account can fall due together.