Self Assessment Tax Return Deadline: Avoid the Last-Minute Panic
Each year thousands of UK citizens submit their self-assessment taxes before or on the deadline day that is 31st January, and almost one-third of this number do it in the very last hour. This year HMRC is expecting 12.1 million tax return filings to be filed of which 55 per cent have already been received as of 29 December 2020. Considering this, around 5.4 million taxpayers will still face last-minute panic as there is now less than a month left to file tax returns.
What is the Deadline For Filing Self Assessment Tax Returns?
The self-assessment tax return deadline for the tax year 2019-20 is 31 January 2021 midnight. However, most of the time, people ignore the fact, that it is also the last date to make your tax payments and not doing so can land you with a hefty fine from HMRC. Our expert tax accountants offer amazing tax services to help you understand the hidden traps and complexities surrounding the last-minute self-assessment tax return submissions and how you can avoid making these mistakes when submitting your tax return self-assessment yourself or through an agent.
Register with HMRC
The first step to avoid late tax filing would be to register yourself with HMRC for online filing and receiving a Unique Taxpayer Reference (UTR). You might find yourself in a delicate situation if you decide to register at the last minute as it can take up to ten working days to receive the UTR after registration. Therefore make sure to complete your registration process at least 15 days before the deadline to be on the safe side.
Tip: HMRC recommend preferably to register before the 5th of October in your businesses second tax year, there could be fines otherwise.
Organise Your Tax Returns
It is crucial to organise your data in order to prepare your tax return using accurate figures quickly while staying compliant. However, if you’re filing your tax returns at the last minute and don’t have exact figures, it may be okay to tick the ‘estimates’ box. You will also need to have an acceptable excuse or a sensible explanation of why you did not provide accurate figures in order to avoid penalties later on. Things such as ineffective bookkeeping would not be considered as an allowable excuse, to not provide actual figures.
Provide Full Details
There might be instances where you feel unsure of the information you are providing; you can use the ‘white space’ boxes while filing the returns online. These spaces should be filled with additional details on the information provided to avoid any penalties and discovery assessments. These boxes are part of the filing process, and any information given should be accurate as HMRC can penalise you if it deems the given information is false or inaccurate. Hiring a personal tax accountant can help you avoid complexities at the last minute when insufficient time and increased workload can increase the probability of delayed tax filings and increased errors.
The Remittance Basis and Deemed Domicile
The remittance basis scheme is available to UK residents when they are not domiciled in the UK and have foreign income and gains. However the scheme became unavailable to individuals from 6 April 2017 who were deemed domiciled on this date or after it. Therefore, you must include all of your income and gains on the return whether remitted or not if the above applies to you.
Adjust Costs used for Personal Consumption
An adjustment is required to differentiate the private cost for items used for personal consumption from business costs. You can adjust the costs for board and lodging by using the fixed rate introduced by HMRC in April 2013, that is if you own one of the following businesses:
- Public Houses
- Guest Houses, bed, and breakfast
- Nursing homes
If you have consumed items from stock then you must adjust those for at the net realisable value (selling Price) However, any assets purchased should be adjusted for at cost if the purpose of the purchase was for your personal consumption.
If your accountants use the right cloud accounting software for accurate record keeping, you may be able to use actual adjusted expenses on a reasonable basis without a lot of time constraints.
Adjust Costs for Home Office use
If you want to submit your self-assessment as a self-employed individual and are working from home, then you can claim home office costs that you incur to your business in your tax return. You can calculate your expenses in a simplified manner as HMRC has already set up a simplified expense system. Not only that, but you might be able to claim the actual partial costs incurred on home maintenance, utility bills, insurance, and mortgage interest as well if you do not opt for the simplified system. The apportioning of these other costs may depend on the nature of business you are carrying out as there is no set rule. From 6 April 2014, you may claim a fixed rate allowance on a monthly basis rather than claiming the actual expenditure on home working to keep things simple.
Adjust Costs for Private use
As a self-employed individual, you must make adjustments for the private use of property and vehicles where relevant. You need to make adjustments, if you used your vehicle partly for private reasons, to disallow a proportion of the total running costs on that private consumption. Consequently, you must adjust the claims for capital allowances as well if you disallow a proportion of running costs. However, any assets used for mixed purposes must be pooled separately from other business assets.
You must lookout for the annual allowance for pension contribution which currently sits at £40,000 to retain your tax relief, e.g if you are an NHS doctor or a high earning taxpayer with large pension pots, crossing the threshold may result in additional tax charges. You will also need to classify correctly the occupational pension contributions as ‘net pay arrangement’ or ‘relief at source’ as both have different tax implications and treatments. It is important to understand your tax liabilities as a pensioner when drawing down your pension, it’s always wise to hire a good accounting firm for help.
Video: How to Register For and File a Self-Assessment Tax Return?
You must pay attention to any carried forward losses, especially capital losses, while organising your tax return as those can be easily overlooked or deemed irrelevant. It would be wise to communicate such carried forward losses to your new tax advisor if you have recently switched accountant or are intending to switch.
Don’t forget the sideways loss relief cap of £50,000 or 25% of adjusted total income when you are looking to offset trading losses against other income as a sole trader or partner. The terminal losses can be carried back three years, the same applies to the losses in the first four years of trading.
Quick Tips for last-minute tax return filing
- If your income is over £50,000 and you or your partner has received the child benefit, then you must complete the higher income child benefit charge section on your tax return or notify your accountant to do so.
- If your income from property or trading is below £1,000, then ask your accountant if you are eligible for the new trading and property allowance.
- If the new trading and property allowance is applicable to you, then there is no need for you to complete the property and/or self-employment pages of the tax return as appropriate.
- The gains on residential property are taxed at 18%-28% , much higher rates of Capital Gains Tax. The lifetime allowance has also been reduced to £1 million from 11 March 2020.
- Understand the payment on account and the key payment deadlines with HMRC.
It is important that you hire an expert accountant as the tax liabilities can get more complicated if not properly followed resulting in potential investigations or discovery assessments. You might have to make amendments in previous tax, VAT, PAYE returns, or have to make voluntary disclosures to HMRC. However, the last-minute tax returns filing might not end smoothly because of high website traffic in recent days, so why delay the inevitable, submit your tax return now.
Jibran Qureshi FCCA is the Managing Director of Clear House Accountants, and has over 10 years of experience in practice and across multiple industries. Jibran’s educational background includes a Master’s in Financial Strategy from Oxford University and an Executive MBA from Hult International Business School. His experience in Financial Strategy, Tax Planning, Operational Consultancy and Performance Reporting guide his cognizant approach to leading Clear House and its clients to the future. It was this dexterity that led him to be Enterprise Nation’s Top 50 Advisors.
Jibran is fueled by his passion for helping businesses. He unequivocally believes that as business advisors and accountants for our clients, it is our responsibility to work with them as business partners. As specialists, it is our duty to help our clients navigate through the complexities of constant change and the implications that come with it.
Over the past decade, innovative disruptions have changed the way businesses work, everything from cloud software, innovative business models, to AI and machine learning, have impacted how businesses operate, grow, and expand.
Jibran recognized the need to manage these disruptions sustainably, early on and shaped Clear House Accountants to not just be compliance specialists, but advisors who help build complex ecosystems around cloud accounting software, provide advice on funding support, help manage innovative tax schemes, set up and implement complex strategic plans, and much more. So, his clients can thrive, not just survive.
Jibran developed his prime role as the Managing Director to build Clear House’s capabilities so it can add value for their clients. He is of firm belief that this can be done through consistent high-level training, building the right tools, and creating roadmaps to help businesses cope with prospective disruptions. He envisages that every client that comes on board, is provided maximum value through onboarding, ongoing services and the right mix of tools to help them become the best in the world.