The self-employed and others who need to declare income to HMRC have just a few hours to complete a self- assessment tax return, before the deadline at midnight tonight.
As recently as 26 January, almost 2.7million people were yet to file according to the taxman’s records.
With just over 12million taxpayers expected to do so this year, it means more than one in five people delayed completing their return until the last week.
Don’t delay: The penalties for late tax returns involve an initial £100 fixed penalty, which applies even if there is no tax to pay
What is the fine for a late tax return?
Those who fail to meet today’s deadline face an initial £100 fixed penalty, which applies even if there is no tax to pay.
After three months, additional daily penalties of £10 per day, up to a maximum of £900 will be added.
Then after six months, a further penalty of whichever is greater out of 5 per cent of the tax due or £300 will be be charged. After one year, another 5 per cent or £300 charge will be added.
If someone files their return form, but doesn’t pay what they owe by the 31 January deadline, they will be charged 5 per cent of the tax unpaid at 30 days, six months and 12 months.
Trusha Shah, tax manager at accountancy firm HW Fisher said: ‘It’s important to make sure that you complete your tax return on time.
‘If not, you’ll face a £100 fine – and this will increase if your return is more than three months late.
‘Particularly if you’re making a payment from overseas, allow extra time as there are sometimes delays with processing.
‘For more information on how to pay, or to set up a payment plan, visit HMRC’s website which has lots of helpful resources.’
Do you need to complete a tax return?
Anyone who is self-employed and has received or earned untaxed income over £1,000 needs to file a return for the 2021/22 tax year.
So do those who earned £100,000 or more during the last tax year, or were a partner in a business partnership.
The tax year ran from 6 April 2021 to 5 April 2022.
It may also be necessary to do a tax return if you are not self-employed, but still have untaxed income. This could include income from a side business or freelance work, from renting out a property, tips and commission, income from savings, investments and dividends, or foreign income.
Some Covid-19 grant or support payments may also need to be declared in a tax return.
It’s worth noting that people can choose to fill in a tax return to claim some income tax reliefs or to prove they’re self-employed in order to claim tax-free childcare or maternity allowance for example.
For those that receive Child Benefit, if their income or their partner’s income was over £50,000 in the 2021/22 tax year, they may need to send a return and pay the High Income Child Benefit Charge.
The information you need to have to hand
Unique taxpayer reference
National insurance number
P60 and P45
Your total income and any income from property, investments and shares
Details of your business expenses if you’re self employed
Any contributions to charity or your pension
Can I still register for self-assessment?
The deadline to submit a paper tax return was on 31 October last year, which means that those who are still yet to file their self-assessment must do so online.
Those who are yet to register for the first time with HMRC will not make the deadline. In fact they should have registered by 5 October last year.
HMRC will need to send them a Unique Taxpayer Reference number by post, which is needed to set up a Government Gateway account. This is followed by another letter with an activation code.
Those who are already registered with HMRC can file until midnight on 31 January.
However, for many it may take longer to complete than they think, particularly if they are declaring untaxed income from multiple sources.
For those aiming to complete it before the deadline tomorrow, it would therefore be unwise to leave it until the final hour.
‘Gathering paperwork takes longer than you think,’ says Shah. ‘If you are salaried this includes your P60 which will confirm the total tax you have paid on your income.
‘You will also need a record of benefits and expenses which can be found on your P11D or P9D forms.
‘If you have left a job in the last tax year, you will also need a P45 from your previous employer.’
More than 12million customers are expected to file a tax return for the 2021 to 2022 tax year
How you could reduce the tax you owe
1) Claim tax relief on pension contributions
Those making personal pension contributions are entitled to relief at their marginal rate of tax.
People can typically pay up to £40,000 towards their pension every year and be entitled to tax relief, unless they have reached their lifetime allowance of £1,073,100.
If they pay contributions directly to a personal pension rather than through a company scheme or by salary sacrifice, they will get basic rate tax relief at source – but they need to claim the additional 20 per cent or 25 per cent through their tax return.
2) Maximise your charitable gifts
For those who have made a gift to charity and signed the gift aid declaration, the Government tops up the donation giving the basic rate tax relief due on it to the charity.
However, higher and additional rate taxpayers can also claim the difference between their top tax rate (40 per cent or 45 per cent) and the 20 per cent basic rate on the total value of a donation made.
3) Claiming child benefit
Once someone begins earning £50,000 per year, child benefit starts to be withdrawn. This benefit pays £1,133 a year for a first child, and £751 per additional child.
People get no child benefit at all once the income of the highest earner in a household hits £60,000.
If someone’s income is between £50,000 and £60,000, then the tax charge is less than the full amount of child benefit and increases gradually to 100 per cent as income reaches £60,000 and over.
Income includes taxable benefits received from a job, like a company car or medical insurance.
If a person previously paid the charge but their income dropped during the year, for example due to furlough, they may have paid too much tax through their pay and it would be worth checking if they are due a refund.
4) Working from home or hybrid working
Those that regularly worked from home during 2021/22 can claim £6 per week as a tax deduction for the extra costs such as heating and lighting.
If they didn’t claim this during the year through their PAYE tax code, they can claim it through a tax return.
5) Keep records
Don’t forget to make a copy of the completed tax return and keep a copy on file.
If someone is employed or a pensioner, they will need to keep all paperwork for 22 months from the end of the tax year to which it relates to.
If they are self-employed or letting a property, they should keep all paperwork for five years and 10 months.
How do you know if you have to do a tax return?
1) You are self-employed or a sole trader, and have earned at least £1000 in income in the past tax year
2) You’re a partner in a partnership business
3) You’re a director of a limited company
4) You’ve earned tips or commission equating to £1000 or more
5) You have income from property
6) You have income from foreign sources
7) You have income from savings, investments or dividends
8) You need to claim tax relief, such as on pension contributions