Christopher R Brown Ltd

Self Assessment penalty warning: not all voluntary returns need filing.

A recent First Tier Tribunal ruling is worth knowing about. The case of Gerrit Wals v HMRC established that HMRC cannot charge late-filing penalties for voluntary Self Assessment returns - returns where no notice to file was ever issued.

This is a point that's easily missed - and it matters if you've received a penalty for filing late when you filed voluntarily without being formally required to.

The broader point this raises: do you actually need to be in Self Assessment?

You need to register if you:
- Are self-employed with income over £1,000
- Are a company director
- Have untaxed income over £2,500
- Have income over £100,000
- Received a formal notice to file from HMRC

If you're filing voluntarily and shouldn't be, or if you've received a penalty on a return filed without a formal notice - this ruling may be relevant to you.

Penalties aren't always correct. Get in touch if you've had one and aren't sure it's valid.

Can you incorporate to avoid Making Tax Digital?

Yes - and it's completely legitimate. A limited company is subject to Corporation Tax, not Income Tax. That places you entirely outside the scope of MTD for Income Tax.

For sole traders approaching the £50,000 income threshold who were already considering incorporation, MTD is now an additional reason to make the move. But be careful: incorporation should never be driven by tax compliance avoidance alone. There are real costs and admin obligations involved.

The fuller picture:
- Limited companies don't do MTD for Income Tax
- But you will have more admin: corporation tax returns, annual accounts, Companies House filings
- You'll need an accountant - budget £500-£2,000 per year at minimum
- You should only incorporate if the overall tax saving justifies it

At profit levels above around £60,000, the combined benefit of lower corporation tax + dividend efficiency + escaping MTD admin can be compelling. Below £40,000, it often isn't worth it.

Book a chat with us and we'll model both scenarios for your situation.