Self-Assessment tax return – 10 tips to help you hit the January 31 deadline and avoid overpaying

From checking whether you need to file a return to leaving enough time to register or input your information and taking advantage of tax allowances to reduce your bill, acting now will stop you facing hefty fines 

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Published: 10 Jan 2023 Updated: 27 Feb 2023
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Alice Haine, Personal Finance Analyst at Bestinvest, the DIY investment platform and coaching service, comments:  

“Leaving personal finance decisions to the last minute is something many of us do, whether it’s renewing insurance, securing a new mortgage deal or switching to a better savings account. But one task that requires careful consideration and must be delivered on time is submitting your Self-Assessment tax return – something more than 12 million of us must do by January 31 for the 2021 to 2022 tax year. 

“While the deadline to send a paper return has passed, fail to submit an online return by January 31 and you will incur an instant fine with additional penalties to come the longer you take to file the document or pay any further tax owed.  

“With just over three weeks left, some have already bowed to the pressure with just over 25,000 tax returns filed on New Year’s Eve and about 17,500 on New Year’s Day, according to HM Revenue. Some customers even ditched the New Year’s Eve celebrations altogether with 129 returns submitted between midnight and 1am on 1 January. 

“While those that have already filed their return should be able to breathe easy – as long as they input the information correctly – for the 5.7 million yet to submit their form (as of January 3), the pressure is now on to get the form across to HM Revenue & Customs.” 

Here are 10 things to consider to ensure you hit the deadline problem free: 

1. Miss the January 31 deadline and you will face fines

While those that provide a genuine excuse for filing a late return before January 31 will be treated “leniently”, according to HMRC, as the body focuses on persistent offenders or deliberate tax evaders, those with no legitimate excuse will face the following fines: 

  • An instant fine of £100 even if there is no tax to pay 
  • Fail to file for a further three months and you will incur additional daily penalties of £10 - up to a maximum of £900
  • After six months, a further 5% of the tax due or £300, whichever is greater, will be dished out
  • After 12 months, another 5% or £300 charge – whichever is greater.

This means customers could be looking at a £1,600 outlay if they fail to file their tax return for the 2021/22 tax year for more than a year – and that’s without factoring in interest on those fines. 

Separately, there are also penalties for paying the tax you owe late by 30 days, six months and 12 months – this equates to 5% of the tax owed, making the whole process very expensive. 

If you know you aren’t going to hit the deadline and want to know how much you will pay in penalties and interest, HMRC’s online tool calculates this for you.

2. Double check if filing a return applies to you 

Most British taxpayers don’t need to file a tax return because tax is automatically deducted from their wages (known as Pay-As-You-Earn, or PAYE), pensions or savings. But for those where the tax is not automatically deducted or they earn extra untaxed income, filing a tax return is a must.  

With tax thresholds frozen until 2028, more people will be forced to file a tax return this year because their income may have jumped above £100,000 – a salary threshold at which all earners must submit a tax return. But there are other reasons why filing a tax return is necessary for the 2021/2022 tax year. These include those: 

  • Who were self-employed and earned more than £1,000
  • Who earned more than £100,000 in taxable income
  • Who earned money from renting out property or other untaxed income such as tips and commission
  • Who earned income from savings, investments and dividends
  • Who earned income from overseas or who lived abroad and had a UK income
  • Who were a partner in a business partnership
  • Who are employed but use their own money to travel and other job expenses
  • Who claimed some Covid-19 grant or support payments
  • Who need to claim income tax reliefs such as money paid into a personal pension, business expenses if you are self-employed and charitable donations
  • Who earned more than £50,000 and you or your partner claims child benefit

For anyone unsure, HMRC has a handy tool to check if you need to file a tax return.  

3. Allow enough time for registration or sign-in glitches 

If you’ve never filed a tax return before then allow at least 10 working days to register – or 21 if you are based abroad. While most of the registration process is fast as it can be completed online, the final part relies on Royal Mail, and with the service affected by strike action that 10 days could stretch even longer. 

The first step is to create a Government Gateway user ID for which you simply need your name, email address and a password. You must then answer security questions to verify your identity for which you’ll need your National Insurance number, passport, pay slips or P60.  

Once your self-assessment account is set up online, HMRC will send you a letter with your Unique Taxpayer Reference (UTR) - a 10-digit code you need the first time you log in. It can take up to 10 working days to receive this code by post so if you haven’t taken action yet, get going today. 

Those who have not filed a tax return for a while or may have forgotten passwords etc., should be able to recover the information online but if you encounter problems and need to call HMRC, remember phone lines will be jammed in January as people make a last-minute dash to complete the document. There have been reports of people staying on hold for well over an hour and then being cut off, so start your calls early in the day at 8am to beat the queues. 

4. Double check your tax return before you send it

Have you done your calculations properly and have you declared everything? HMRC can charge penalties if you make an error on the return or any other paperwork you submit even if they were made in good faith. 

These include understating or misrepresenting how much tax you owe. If you have a reasonable excuse for this error, then you may be able to appeal any fine imposed. If you cannot appeal or lose your appeal, the penalty you pay depends on the type of behaviour around the error, whether you notified HMRC or not and a percentage of the potential lost revenue.  

5. Don’t underestimate the time needed to get paperwork together 

It’s not just your online registration that takes time but also actually filling in the tax return itself. You will need a lot of information to hand in addition to your Government Gateway login and UTR, from all your sources of income, including your employer, property income, savings and investments and even freelance work, to any charitable donations, capital gains on any assets, contributions to pensions and more. 

Types of information required include: 

-Pay slips and annual P60 form  

-Any dividends and tax credits received during the 2021/22 tax year  

-Any contributions to pensions, Venture Capital Trusts or Enterprise Investment Schemes 

-Any charitable gifts that qualify for Gift Aid  

-Details of possible capital gains crystallised on the sale shares or funds held outside of ISAs and pensions, as well as other assets such as the sale of a buy-to-let property 

-For those with a buy-to-let portfolio, the details of all income and expenses over the course of the tax year 

-Any tax reliefs that you can apply for such as working from home allowance, uniform allowance for work clothes you either pay for yourself or wash and repair at home. 

Getting your hands on all this paperwork can take time, plus you want to make sure you are up to speed on all tax rules that apply to your unique situation. The last thing you want to do is leave this until the last minute and then find a vital document is missing and you don’t have enough time to source it. 

Even if you have a tax adviser, the chances are that they are snowed under in the run-up to January 31, increasing the likelihood of mistakes and omissions in your tax return. 

6. Have the funds ready as you must pay immediately 

As well as filing the tax return by January 31, you also need to pay your tax bill by that date. This is the tax you owe for the previous tax year – i.e., 2021-22 – and is known as the balancing payment. You can pay online with HMRC or pay using bank transfer, debit card or cheque or pay at your bank or building society if you have an HMRC paying-in slip.  

If you set up a direct debt for the first time, allow five working days for this process to complete, so again act fast if this is your chosen payment method.  

If you are lucky and HMRC owes you money, you will receive a payment directly into the account you ask it to when you fill in your return. 

While you can also pay tax through your PAYE tax code, this only applies to those who submitted a paper return by October 31 or an online tax return by December 30, owe less than £3,000 and already pay tax though PAYE – i.e., they are an employee or receive a company pension.  

To reduce the hit of paying the tax in one go, sign up for the Budget Payment Plan provided by the government. While this won’t help you for the 2021-22 tax year payment, it will reduce the burden for next year as you can elect to pay weekly or monthly. The money will be used against your next bill – allowing you to pay over the course of the year rather than facing one big bill. 

7. If you cannot afford your tax bill, there are options

If your tax bill is unaffordable don’t panic. HMRC has options for those in financial distress so burying your head in the sand and racking up fines is not the answer. 

The Time to Pay scheme is a payment plan for those that owe less than £30,000, are within 60 days of the payment deadline and plan to clear the debt within 12 months. To be eligible, you must not have any other debts or payment plans with HMRC and be aware you will be expected to tap into your own savings and assets to reduce the debt. 

HMRC will want to know how much you earn, the amount you typically spend per month and how much you can afford to repay.  

For those in real trouble, who may have already received independent debt advice from an organisation such as the Citizens Advice Bureau – they will accept this as evidence of what you earn and spend each month. 

8. Don’t forget to declare your Covid-19 payments

During the Covid-19 pandemic the Government launched a slew of grants and support payments for business owners and the self-employed. For the 2.9 million people that claimed at least one Self-Employment Income Support Scheme (SEISS) payment in the 2021-22 tax year, these are taxable and must be declared in the tax return. 

Other Covid-19 support scheme payments should also be declared by individuals that are self-employed, in a partnership or in a business. These include the SEISS, the Coronavirus Job Retention Scheme and other Covid-19 grants and support payments such as Eat Out to Help Out and test and trace or self-isolation grants. 

Abuse of Covid19-support schemes cost the Treasury several billion, which was embarrassing for the Government, so HMRC is likely to crack down on self-assessors who omit this information, intentionally or otherwise. 

9. Mop up any unused allowances by amending previous tax returns 

As well as ensuring this year’s tax return is correct, you can also amend previous tax returns too and earn yourself a rebate in the process. 

You have until January 31 to tweak your 2020-21 tax return, something you can either do online if you filed your return online or by downloading a new paper return and submitting the amended pages with the word ‘amendment’ on each page along with your name and UTR. 

This can be useful if you want to mop up any unused allowances such as the Work from Home allowance, which applies to anyone required to work from home during the 2020-21 and 2021-22 tax years. You are effectively claiming for the increased costs of heat or electricity and can apply for a full year’s relief even if you only needed to work from home for a day – which could be worth up to £280.  

Other allowances you might want to add to previous years could include any charitable donations you made, or extra pension contributions to use up your pension allowance from the previous three years, known as ‘carry forward’ (more below). 

Once you’ve filed your 2021-22 return, you can amend it anytime from 72 hours after you’ve filed it until January 31, 2024. 

Those wanting to update a return for the 2019-2020 tax year or earlier can write to HMRC explaining which tax year you are correcting and why you want to make an amendment. Depending on what you report, you may receive a rebate, but you might also have to pay tax too. Note: you can claim a refund up to four years after the end of the tax year it relates to - so don’t leave it too long. 

10. Use the lessons learnt this month to reduce next year’s tax bill

Once your tax return is filed, don’t just put all your paperwork away and breathe a sigh of relief that you don’t have to do it again for another year. Instead, use this deadline as an incentive to fire up next year’s tax return, making sure you’ve jotted down any key information over the course of the tax year so far such as any charitable donations you have made and making early calculations of extra income you have earned, such as from freelance jobs.  

If your tax bill was heavy this year, consider ways soften the financial hit for next year such as paying more into your workplace or personal pension to secure more income tax relief, using up your £20,000 ISA allowance, or crystallising any capital gains to maximise this year’s more generous exemptions. Subscriptions to other more esoteric tax efficient schemes, such as Venture Capital Trusts and Enterprise Investment Schemes, also provide income tax rebates (at 30%), though these are higher risk and aimed at wealthier investors.  

This is more important than ever this year after Chancellor Jeremy Hunt froze most personal tax allowances in his Autumn Statement in November, lowered the threshold at which the highest 45% income tax band kicks in from £150,000 to £125,140, reduced the annual Capital Gains Tax exemption and unveiled steep reductions in the annual tax-free dividend allowance. 

For this reason, investing in a pension is the best way to reduce an income tax liability, since tax relief is provided at your marginal tax rate which is particularly attractive to the rapidly growing number of people subject to the higher tax bands. A record 5.5 million people are expected to pay income tax at the 40% band this year, a number that is sure to rise further under the planned freeze in thresholds until 2028. 

With the risk that the Chancellor or a future Labour government could target these generous pension tax reliefs in the future, it would be wise for those subject to the highest tax bands to maximise their pension contributions this tax year, with those paying basic tax receiving 20% tax relief on contributions, higher rate taxpayers receiving an extra 20% and additional tax rate payers an extra 25%. 

While the maximum gross annual contribution is £40,000 for those with total adjusted incomes below £240,000, once that is utilised you can mop up unused reliefs from the previous three tax years – a process known as pensions carry forward – starting with the earliest year. To be eligible you must have had a pension in place in the year from which you are carrying forward to use unused allowances, but your new contribution does not need to be paid into the same pension. 

 

Investments go down as well as up and investors may not get back the amount originally invested.

Prevailing tax rates and reliefs depend on individual circumstances and are subject to change.

About Bestinvest

Bestinvest is a multi-award-winning, digital investment platform and coaching service for people who choose to make their own investment decisions but with the support of tools, insights and qualified professionals. It offers access to thousands of funds, investment trusts, ETFs and shares through a range of account types, including an Individual Savings Account, a Junior ISA for children, a Self-Invested Personal Pension and General Investment Account.

Alongside providing investors access to an extensive choice of investments, Bestinvest also offers a wide range of ready-made portfolios for people seeking a managed approach that suits their risk profile, saving them the need to select and monitor their funds themselves. These include a highly competitively priced ‘Smart’ range that invests through low-cost passive funds, as well as an ‘Expert’ range that invests with ‘best-of-breed' managers. 

Bestinvest provides investors with a unique range of new features to help people better manage their long-term savings, including free investment coaching from qualified financial planners, low-cost fixed fee advice packages and advanced tools to help people plan goals and monitor progress towards achieving them.

Bestinvest is part of Evelyn Partners, the UK’s leading wealth management and professional services group created by the merger of Tilney and Smith & Williamson in 2020. Evelyn Partners is trusted with the management of £59.1 billion of assets (as of 31 December 2023) by its clients, who are private investors, family trusts, entrepreneurs, businesses, charities, financial advisers and other professional intermediaries.

Bestinvest is a trading name of Evelyn Partners Investment Management Services Limited, which is authorised and regulated by the Financial Conduct Authority.

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