Yep – it is that time of the year again! The Self Assessment tax deadline is 31 January 2023. If you are organised and understand what is required, you will have no trouble filing your tax return if you have not already. But if you find the whole process daunting, you might want to sort it out asap or seek some assistance, to avoid late filing penalties. In this blog post, we will look at everything you need to know about filing your Self Assessment tax return:
What is a Self Assessment tax return?
A Self Assessment tax return is a paper or an online form submitted to the HMRC every year by certain categories of people who owe tax on the income they have earned. For the majority of people, the tax is automatically deducted from their wages or pension, known as PAYE, and they therefore do not have the joy of rummaging around trying to find evidence of income, charitable donations, share dividends and the like each year.
But if you earn extra income in the form of dividends, capital gains, or self-employment, you must report the same to the taxman by sending a Self Assessment tax return.
Scenarios when you are required to file a Self Assessment tax return
- You were required to file a tax return last year
- You have untaxed income from investment, land or property, or from abroad
- You are a pensioner who gets a minimised age-related allowance (You could be sent a special short version requiring fewer details.)
- You make capital gains above the annual exempt amount, i.e., £12,300)
- If your income (or your partner’s, if you have one) was over £50,000, you may need to send a return and pay the High Income Child Benefit Charge.
If you are aware that you owe taxes, you should not rely on HMRC to contact you. Declare all of your taxable income each year and file your Self Assessment tax return before the deadline.
When to register with the HMRC for Self Assessment
“How do I fill out a self assessment tax return,” you ask? Well, first of all, not everyone who earns money other than salary is required to register with HMRC. But you will probably need to notify the taxman when you earn taxable income, such as returns on savings and investments, rental income, commissions, and profits from selling property.
Additionally, if you are applying for particular benefits, you might need to register with HMRC. You can determine whether you need to file a return by using a handy tool on the UK government website. In case of any doubt, you can get in touch with HMRC personally or contact the experts at Lyel Accountants.
Key Self Assessment dates you should keep in mind
If you are supposed to submit a Self Assessment tax return, here are the critical dates to keep in mind:
- 5 April: Old tax year ends
- 6 April: New tax year begins
- 31 January: The deadline for submitting your tax return electronically and paying your dues. (The date for paper returns is 31 October.)
- 31 July: The deadline for making the “payment on account” deposit if you are a contractor, freelancer (Another payment has to be made in January)
- 5 October: The cutoff date to register with HMRC for Self Assessment registration (If you run your own business, you have to do this in the second tax year of your business.)
- 30 December: The deadline for submitting online returns for individuals who owe less than £3,000 on the tax bill or who already pay through PAYE – if they want HMRC to collect tax through their tax code
Penalties for missing Self Assessment tax deadlines
You must file your Self Assessment tax return with HMRC by 31 January 2022, 11:59 pm. If you are unable to do so, you must pay the fine unless you have a reasonable excuse. You can find examples of reasonable excuses here. But here are the penalties you are likely to pay on missing the deadline:
- Missing even a day leads to an immediate fine of £100.
- A three-month delay results in you paying £10 every day for a period of 90 days.
- A six-month delay results in an extra fine of £300 or 5% of the tax owed, whichever is greater.
- A 12-month delay means all your previous penalties plus an additional £300 or 5% of the tax owed, whichever is greater.
- In some cases, you might even get a penalty to pay 100% of the tax owed.
You can appeal to HMRC against a tax penalty if you face:
- Mail delays
- Severe sickness
- HMRC portal issues
- Untimely death of a relative
- Earthquakes, floods, or any other calamities
- Computer/software failure during tax return filing
- Unexpected hospitalisation just prior to the deadline
Information needed to fill in a Self Assessment tax return
Half the battle is won when you have the necessary details with you to file a tax return. Please make sure you have:
- Your 10-digit Unique Taxpayer Reference (UTR)
- Your National Insurance (NI) number
- Details of your untaxed income from the tax year, including income earned from dividends, self-employment, and share interest
- P60 or other paperwork showing how much income you’ve already paid tax on
- Self-employment expenses, and charity or pension contributions that may be eligible for tax relief
It might be worth reading the relevant HMRC helpsheets, especially the extra sections – known as supplementary pages – that offer appropriate guidance while filing a Self Assessment tax return.
How long does it take HMRC to process Self Assessment online?
Good question! HMRC usually takes somewhere between 5 days and 8 weeks, depending on various factors, including whether you applied online or by paper, the system involved – for instance, by PAYE or Self Assessment – and whether the taxman makes any security checks during the process.
How to take help from your accountant while file your returns
If you have decided you want to take the help of a specialist to prepare and submit your Self Assessment, please keep the following things in mind:
1. Understand your tax liability to pay on time
The sooner you organise your documents, the sooner your accountant can calculate your tax bill. This allows you enough time to budget for taxes and pay your dues. HMRC charges interest on outstanding amounts if you do not have a “time to pay” arrangement with them. Relax! When you file early, HMRC can send you your tax refunds faster. The extra cash can help you better plan the rest of the year more efficiently. So, please file your returns by 31 January 2023.
2. Discuss how you can save on tax in the next financial year
When you submit your documents early, your accountant has more time to determine how you might save on taxes based on your cash flow patterns and personal circumstances. You can freely reevaluate your incomes and expenses with your accountant and take appropriate measures for next year.
3. Switch from single trader to limited company
As a sole trader, you and your business acta as one entity, putting your assets at risk if the latter goes under. On the other hand, limited companies do not face this risk. Discuss with your accountant the benefits of moving to limited company status and benefiting from any tax savings you might make that way.
Avoid the last-minute rush
Filing a Self Assessment tax return is not as daunting as it seems, especially when you have the proper knowledge, all the records in place, and ample time on your hands to complete the job. If you do not want that hassle, speak to us! We can help you with any queries related to Self Assessment and if you want us to file it for you, we can do that too!
