Don't delay, the meter is running

Fill in that tax return now, warns Steve Lodge

Two million people risk having to pay interest and fines worth a total of many millions of pounds for missing this week's tax return deadline.

This Thursday, 31 October, is the date when tax offices should have received returns from higher-rate taxpayers and anyone else with untaxed income or capital gains for the 1995-96 tax year (ending in April this year). More than 8 million people get tax returns every year, but a quarter of these miss the deadline.

Returning your tax form late means you may not get a bill for any extra tax due in time to meet the Inland Revenue's payment deadlines - 31 January for income tax, 1 December for capital gains. The Revenue says it cannot guarantee to be able to tot up any extra tax due and issue bills in time for these dates if individuals do not get submissions in by 31 October. And if you do not pay up by the required dates - even if you are still waiting for your bill, called an assessment - interest starts clocking up automatically at a rate of 6.25 per cent a year.

In addition, the Revenue can levy penalties equivalent to the tax owed (on top of the tax itself and the interest) on people who fail to disclose untaxed earnings.

Many people set to miss the deadline will do so simply because the form looks daunting. In practice, however, you may find only a few sections need completing.

Not receiving a tax return is not an excuse for missing the deadline, says the Revenue, and these people still risk being charged interest and penalties on unpaid tax. If you are a higher-rate taxpayer you are almost certainly liable for some extra tax, because any money you have in bank and building society accounts effectively only has basic-rate tax deducted from the interest. The Revenue advises these higher rate taxpayers, and anyone else who thinks they may have untaxed earnings from last tax year, to ring their local tax office to get a tax return or discuss their position. Where the amount of extra tax due is small it may not be necessary to fill in a return.

If you cannot find all the necessary information (such as your P60 certificate of pay and income tax for last year or certificates of interest earned, to complete your tax return in time to meet the deadline) the Revenue recommends filling in what you can and attaching a note saying what is yet to come, briefly explaining why the information is late. Paul Franklin, a Revenue spokesman, says: "Let us know you are aware there is a gap and that it will be filled."

If you are having problems filling in your tax return because you don't understand it, the Revenue sends out an explanatory booklet with tax returns called Filling in your 1996 Tax Return which should help with many queries. Local tax offices and tax enquiry centres should also be able to help.

Experts suggest reading the whole tax return before you start filling it in, making a note as you go along of the sections that apply to you. Then dig out the records you need. If, after asking for help, you remain unsure about what to put in or where to put it, or if the space on the form is too small, use a separate piece of paper. Explain what you are doing and raise any queries in a covering letter.

A number of investments can be left out of tax returns altogether because they are tax-free. As well as National Savings certificates, these include PEPs, Tessas, SAYE accounts and premium bond winnings. Accountants warn that it is not worth leaving out taxable bank and building society savings because these institutions provide the Revenue with details of interest paid over the year.

When finished, it is always worth keeping a photocopy of your tax return in case of any comeback from your tax office.

The Revenue says its interest is in getting the "right amount of tax paid, not in levying penalties". But taxpayers should not expect any leniency simply because the Revenue is wrestling with the problems of bringing in self-assessment, a change to the tax system which arrives next April. In fact, the Revenue's additional workload could mean that people who send back their tax returns late this year are more likely to end up with interest bills.