According to HM Revenue & Customs, over 2,700 Brits spent Christmas Day 2020 submitting their tax returns online.
In total, 31,400 people completed their 2019/2020 tax returns between 24 and 26 December.
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UPDATE 25 JANUARY 2021
HMRC has announced that those required to file self-assessment tax returns who cannot file by the 31 January 2021 deadline will not receive a late filing penalty if they file online by 28 February.
An estimated three million people who are due to file a self-assessment return have yet to do so. Almost nine million have already filed.
Crucially, the deadline extension does include payment of tax owing. Taxpayers are still obliged to pay their bill by 31 January and interest will be charged from 1 February on any outstanding liabilities.
Taxpayers who cannot afford to pay their tax bill on time can apply online to spread their bill over up to 12 months. But they will need to file their 2019 – 20 tax return before setting up a time to pay arrangement, so HMRC is encouraging everyone to do this as soon as possible.
HMRC said: “Not charging late filing penalties for late online tax returns submitted in February will give people the breathing space they need to complete and file their returns, without worrying about receiving a penalty. We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic.”
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Working out a tax bill early can help with your financial plans for the year ahead, and sticking to the rules means not incurring a £100 fine.
As the clock ticks down to an important January deadline, here’s our guide to tax returns and self-assessment.
Who needs to submit a tax return?
Most UK taxpayers have their taxes deducted automatically via payroll, wages or pensions and aren’t required to complete any extra paperwork.
But if you were self-employed for either the whole (or part) of the 2019-20 tax year (running from 6 April 2019 to 5 April 2020), it’s likely you’ll need to complete a self-assessment tax return (or pay an agent, such as an accountant, to do it on your behalf).
The same applies if, during that period, you received more than £10,000 in income from savings and investments.
Other candidates for self-assessment typically include business partners, as well as landlords who receive rental property income. Falling into one of these categories means the onus is on the individual to declare his/her taxable income. It’s not a case of waiting to hear from HMRC before submitting a return.
The GOV.uk website has a tool to help you find out if you need to send a return and also provides guidance on how to register for self-assessment. If you are a higher rate taxpayer, it may be as well just to check how you stand.
Deadline looming: 31 January
Once registered for self-assessment, if you need to complete a return for the 2019-20 tax year the key date to remember is 31 January 2021.
Miss this deadline and HMRC normally imposes an immediate fine of £100 that ratchets up depending on how long it takes the taxpayer to eventually submit his/her tax return.
As explained above, the deadline for completing a return has been extended to 28 February for returns filed online (but tax is still due by 31 January).
Rather than miss the deadline (because, say, of a missing a piece of information) it’s better to submit an estimated return and update the figures once you have the correct ones to hand.
How do you complete a tax return?
Paper-based returns, once the norm, are much less common nowadays except for more complicated cases (such as those involving trustees). Paper returns linked to the 2019-20 tax year should already have been submitted to HMRC by 31 October 2020.
According to HMRC, of the 11.1 million taxpayers who filed a return before 31 January this year, 10 million carried out the transaction online.
How do you get started online?
You can start the process by visiting the GOV.uk website.
If you’ve not submitted a tax return online before, it’s important to leave yourself sufficient time to sign up to the system before the 31 January deadline. HMRC suggests setting aside about 20 extra days for this process to complete.
So, if the prospect of dealing with your taxes over the festive period doesn’t appeal, be prepared to get cracking as early as possible in the new year.
This is because part of the registration process involves receiving a ten-digit Unique Taxpayer Reference from HMRC through the post. The correspondence will also include instructions on how to set up what’s known as your Government Gateway account.
Once this has been enabled, an activation code is sent out separately that’s also required to complete the setting up of your account. Once activated, the process of logging in and submitting your tax return can finally begin.
How do I complete a tax return?
There is plenty of guidance on the GOV.uk website including factsheets and webinars.
You only need to fill in the parts of the form that are relevant to your circumstances and, if you’re self-employed, you may be allowed to account for your business outgoings using the ‘simplified expenses’ method.
However simple or complicated your arrangements, before starting to fill in the form it’s worth gathering together all the pieces of information that you’re likely to need. This includes: your National Insurance number; accounts; invoices; receipts; and other records of income from banks or other financial organisations.
You’ll also need records of expenses and any forms with relevant tax information such as a P45 or P60. To pay any tax that’s due, or receive any reimbursements, you’ll need to supply bank or building society account details.
Having all your figures to hand heads off the likelihood of omitting any key pieces of information, such as a one-off payment you may have forgotten about. It’s important to be as accurate as possible with the details you provide, remembering to differentiate between ‘net’ or ‘gross’ figures.
Once you’ve filled out your tax return you can see a calculation of what your tax bill will be.
It’s not essential to pay your tax bill at the same moment as you file your tax return, but to stick to the rules, you’ll need to pay the outstanding amount by the end of January.
Can’t afford to pay?
If you cannot pay your self-assessment bill, it’s important to contact HMRC as soon as possible. If you owe less than £30,000, do not have any other debts with HMRC, and your tax returns are up to date, you may be allowed to set up a payment plan to spread the cost of your bill.
“The essential thing is to submit your tax return by the 31 January deadline, even if you do not think you can pay all the tax at once. With the return filed you can apply for a Time to Pay arrangement,” advises Jeremy Coker, president of the Association of Taxation Technicians.
To qualify for Time to Pay, HMRC says individuals should apply within 60 days of the normal payment deadline. This translates to 1 April 2021.
Other useful contact information
It’s possible to have a webchat with an adviser online and ask general questions via twitter using the @HMRCcustomers handle.
HMRC’s general advice line phone number is 0300 200 3310 although it’s worth noting this becomes particularly busy as the 31 January deadline approaches.
HMRC’s self-assessment payment helpline is 0300 200 3822. It is also highly likely to be busy throughout January – unless millions of people decided to tackle their return in the wake of the Queen’s Christmas Day speech this year.
