Self Assessment tax return was a phrase obviously on many people’s minds on Christmas Day with more than 2,700 customers filing their return on the day, according to HMRC (the peak time was 2.00pm to 3.00pm, so perhaps there was a rush ahead of the Queen’s speech).
Boxing Day saw even more (8,500) as did Christmas Eve (20,200) giving a total of 31,400 filled over the three-day festive period. In addition to this 18,000 were filed on New Year’s Day.
Whilst this may seem a large number, the amount filed over the three-day festive period is it is 8% down on the previous year. With the deadline approaching on 31 January 2021 and more tax returns due to be filed this year than last, millions of taxpayers are still yet to complete their Self Assessment tax return and may even miss the deadline.
What are the Self Assessment tax return deadlines?
The deadline for completing your Self Assessment tax return online for the tax year 6 April 2019 to 5 April 2020 is 31 January 2021. (The deadline for paper returns has already passed, being 31 October 2020).
As of 4 January 2021, HMRC calculates 5.4 million returns are still to be filed.
It is prudent to file these as soon as possible, as the system often encounters problems nearer the deadline (especially on 31 January) as people rush to complete their returns on time and the online system becomes overloaded. Rushing at the last minute can also lead to entering errors on a return, which in turn, could lead to penalties for incorrect filing or an increased liability thorough over declaring income by mistake.
Who needs to complete a Self Assessment tax return?
A Self Assessment tax return needs to be completed in the following circumstances (even if you have not earned any income outside of PAYE in the tax year):
- If HMRC has issued a tax return to you. This needs to be returned
- If Child Benefit is received by either yourself or your partner and either of you had an annual income of more than £50,000
- If you have received more than £2,500 in other untaxed income, this could include:
- Tips or commission
- Money from renting out a property
- Foreign income
- If you have received Income from savings, investments and dividends more than £10,000
- By self-employed sole traders who earned more than a £1,000
- Those who are a partner in a business partnership
- Employees claiming expenses in excess of £2,500
- Individuals with an annual income over £100,000
When do you have to make payments to HMRC for your Self Assessment tax return?
Normal procedure is to have paid 50% of your tax liability on account for the 2019/20 tax year by 31 January 2020, and a second payment of 50% by 31 July 2020. This is based on your assessed income from your previous years tax return. Any additional payment due, known as a balancing payment, is due following the submission of your 2019/20 tax return on 31 January 2021.
Due to the impact of Covid-19, the second payment on account, due by 31 July 2020 can be deferred until 31 January 2021. This is now due by (by 31.01.2021) alongside the balancing payment and the first payment on account for the 2020/21 tax year, which is calculated at 50% of your 2019/20 tax liability.
Effectively, for anyone that deferred their second payment on account, they are due to pay the equivalent of an entire year’s tax liability on 31 January 2021. To help taxpayers impacted by Covid-19, these payments can now be paid in 12 monthly instalments by direct debit with a Time to Pay arrangement (see below).
Help in paying your tax bill
The Government has announced further measures to help taxpayers impacted by Covid-19, whereby tax payments due on 31 January 2021 can now be deferred up to 12 months.
The payments that can now be deferred are:
- The second 2019-20 payment on account (which was due on 31 July 2020 and previously deferred until 31 January 2021)
- The balancing payment for the 2019/20 tax year
- The first payment on account for 2020/21
HMRC will only consider assisting taxpayers who are struggling to pay their tax bill once their tax return has been submitted.
Once a taxpayer has completed their tax return and knows how much tax they owe, they can set up a payment plan to help spread the cost of their tax liabilities. This is available online for liabilities up to £30,000, spread out over a maximum of 12 monthly direct debits. Interest is applicable to outstanding balances from 1 February 2021.
If a taxpayer’s debts are greater than £30,000 or they require longer than 12 months to pay their debts in full, a time to pay request can be made direct to HMRC. Again, HMRC will only look at a request once the 2019/20 tax return has been submitted.
Getting help with Self Assessment and agreeing Time to Pay arrangements
Our specialist tax team assists a wide range of clients’ Self Assessment submissions each year, where we calculate liabilities to ensure they are only paying the correct amount of tax they ought to. We also work to make sure businesses are structured in the most tax efficient way to suit personal needs.
Our team also provides help and advice on Time to Pay and ensure that all the required information, such as cashflows, budgets, forecasting and business plans are robust and up to date.