People told to look out for letters from HMRC - or risk fines

HMRC letter
-Credit:GETTY


Receiving an unexpected letter from HMRC can be enough to get the anxiety flowing, but people ignoring letters this month could be in for a far worse surprise in the coming days. This is all due to HMRC’s self-assessment tax deadline on January 31.

Anyone who earned certain untaxed income is required to submit a tax return and pay their dues before midnight on January 31. However, some people may not even recognise their liable for this additional tax as side hustle ventures like cryptocurrency Vinted selling could make you liable if you earn over a certain amount.

To help ensure the people being held to this deadline are aware of it in the first place, the HMRC usually issues what’s known as nudge letters, urging them to submit tax returns and pay their dues.

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But what do you do once you get one of these nudges? The letters can be addressed to individuals or businesses the department believes are likely to not pay the correct amount of tax owed.

There are three types of nudge letters you could receive, according to BDO, which will also change how you need to react to them. Educational nudge letters are arguably the easiest to handle as it’s just designed to bring the recipients attention to something HMRC thinks they may have missed or prompting them to get tax advice.

This could be for future tax returns or even current ones if the deadline to amend the issue hasn’t passed yet. These may not require you to reply to them.

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Letters based on information from the HMRC are very similar to educational letters but may specifically highlight past tax or account mistakes. Taxpayers receiving these letters are encouraged to double check their returns, potentially get professional advice, and fix whatever may need an amendment.

This letter will require a response either in the form of submitting an amended return, if you have enough time before the deadline, or making a formal disclosure to HMRC. It’s also worth noting that while you may be suggested a disclosure process, there are several ways to do this depending on your circumstances.

Finally, the most serious nudge letters come with an additional piece of paper; Certificate of Tax Position. This certificate asks the recipient to tick which of four scenarios applies to them and return the certificate to HMRC.

However, the Chartered Institute of Taxation guidance warns tax advisers that these certificates shouldn’t be completed in most cases, according to BDO. Any type of nudge letter does not signal the start of an investigation by HMRC but your response could potentially spark one.

Missing the January 31 deadline will see taxpayers being fined £100 to start with. Interest could also be charged on any late tax dues and if three months goes by without payment, more fines can be piled onto the bill.