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You should still submit a tax return to HMRC if they’re expecting one, even if you don’t have any profits to report. Failing to send a tax return on time might result in a penalty from HMRC, but you can tell them in advance if you think you no longer need to submit a return. The process for this depends on the type of tax return you normally send.

Why do I still need to submit a tax return if I didn’t earn anything?

If you run your own business, or if you earn untaxed income from another source such as renting out property, you’ll normally need to register to start sending tax returns.

Businesses only need to pay tax on their profits, but you’ll still need to submit a return to HMRC, even if you think you don’t have anything to pay.

This is because HMRC need your tax return to work out whether or not you have tax to pay, so they won’t know about your earnings until you tell them!

Are there any advantages to reporting my business losses?

As well as avoiding penalties for failing to submit a tax return, reporting your losses through your tax return can have other advantages too. For instance, you may be able to ‘carry back’ the loss to a previous year.

It means that you can take the loss you made this year, and offset it against the profits you (hopefully) made the year before. Doing this basically reduces the amount of profit you earned last year, which reduces the amount of tax, so if you’ve already paid your tax bill, you’ll get a rebate.

An example of carry back losses

In Year One, your business makes a profit of £20,000, but in Year Two it makes a loss of £5,000.

You submit a tax return to report the £5,000 loss, and carry it back to Year One. This reduces your Year One profits to £15,000, and you’ll get a rebate for any tax you’ve already paid on the difference.

Do I still need to report a loss if I submit Self Assessment?

Yes, you’ll still need to send any tax return if you’re registered to do so, regardless of what type of tax return it is, or whether you made a profit or a loss. You’ll need to include the details along with any other information, such as wages you receive from an employer, for example.

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Is there a different tax return deadline for reporting a loss?

No, the deadline to send your tax return doesn’t change whether you make a profit, a loss, or the exact same amount as last year.

What are the penalties for not filing a tax return when you’re supposed to?

The penalty system depends on the type of tax return.

Self Assessment

HMRC automatically charge a £100 penalty for a missed tax return deadline, though you might be able to appeal it if you have a reasonable explanation. In most cases the penalty increases the longer you leave your return unsubmitted, and you’ll also be charged interest on your tax bill.

Company Tax Return

You’ll receive an automatic £100 penalty if your Company Tax Return is a day late, and a further £100 at the 3-month mark. After 6 months HMRC will estimate your tax bill and add a 10% penalty.

VAT return

The points-based penalty system for VAT returns means you’ll accrue penalty points for each missed VAT deadline, and a fine will be issued if you hit the points threshold. The threshold depends on how often you need to make a VAT submissions to HMRC.

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About The Author

Lauren Harvey

A fully AAT and ACCA qualified accountant, I support a wide range of businesses, from sole traders and partnerships to larger limited companies. Learn more about Lauren.

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