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One thing is a certainty - most of us will be liable to pay some level of personal tax. As a taxpayer, you need to be aware that Income Tax returns that are due to be filed on or after 1^st April 2009 will be subject to a new system of penalty charges. Penalties have always formed part of the tax system and were put there to encourage compliance, however, the new penalty regime has been designed so that the behaviour leading to the error is penalised appropriately.

Under the new system, as long as you take reasonable care to make sure that your return is completed correctly, you will not be charged a penalty.

HMRC define reasonable care as: keeping personal tax records accurately, asking when you don't understand something and informing HMRC promptly about any errors you discover.

If you do not take reasonable care as outlined, then HMRC will penalise you. If your error is deemed to be deliberate then you will be penalised more severely.

If you make a mistake that causes your personal tax liability to be under-assessed or misrepresented then a financial penalty may be applied.

If a penalty is charged to you then it is possible to have it suspended for up to 2 years as long as you meet certain conditions and do not generate any further penalties during the suspension period. If you meet all the conditions, then at the end of the suspension the penalty can be cancelled. This does not apply to penalties charged because of deliberate errors.

Penalty charges will be graded as follows: if you have taken reasonable care - no penalty, if you have been careless - maximum penalty is 30%, if you have made a deliberate error - penalty will be between 20% and 70%, and if you have made a deliberate error and tried to conceal it, you will be charged between 30% and 100%.

If you disclose any errors, then the penalty charge may be reduced depending on how much information you give regarding the error, and whether you help to calculate the additional tax that needs to be paid. You may also need to give HMRC access to check your figures.

If you are going to be charged a penalty, then HMRC will send you a penalty notice, and you will have the right of appeal.

As long as you submit all required returns and documents relating to your personal tax affairs, keep good records, and query things that you are not sure about with your tax advisor, then you are unlikely to be charged any penalties at all.

Please don't hesitate to communicate with 1st Contact for advice on personal tax matters.