HMRC letters will land on some doormats this month (Image: GETTY)
An unexpected letter from HMRC can certainly cause anxiety, but those who choose to ignore these letters may cause an even bigger shock in the coming days.
This is all due to ’s self-assessment tax deadline on January 31. Anyone who has earned certain untaxed income must submit a tax return and pay their dues before midnight on January 31.
However, some people may not even realise they’re liable for this additional tax as side hustle ventures like cryptocurrency or Vinted selling could make you liable if you earn over a certain amount.
To ensure that those subject to this deadline are aware of it, usually issues what’s known as nudge letters, urging them to submit tax returns and pay their dues.
These letters can be addressed to individuals or businesses that the department believes are likely to not pay the correct amount of tax owed.
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According to , there are three types of nudge letters you could receive, which will also determine how you need to respond to them.
Educational nudge letters are arguably the easiest to handle as they’re designed to draw the recipient’s attention to something thinks they may have missed or prompting them to seek tax advice.
Future or current tax returns could be changed if the deadline to amend the issue hasn’t passed yet as a result of the nudge letter.
Letters based on information from are 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 seek professional advice, and fix whatever may need an amendment.
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This letter will require a response either in the form of submitting an amended return, if there is enough time before the deadline, or making a formal disclosure to . It’s also worth noting that while a disclosure process may be suggested, 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 .
However, according to BDO, the Chartered Institute of Taxation guidance warns tax advisers that these certificates shouldn’t be completed in most cases. Any type of nudge letter does not signal the start of an investigation by 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.