As Benjamin Franklin once said: ‘Nothing is certain, except death and taxes’. In these times of political and economic turmoil, the one constant is the self assessment tax filing deadline of 31 January.
Those of you who are self employed or have received additional income other than your PAYE income, such as dividends or property rental, in the period between 6 April 2021 and 5 April 2022, have until midnight on Tuesday 31 January 2023 to file your return online.
How to submit your return
If you are new to self assessment you will need to register with HMRC first. This can take up to 10 days so make sure you do it in plenty of time before the deadline. Once registered, HMRC will send you your Unique Taxpayers Reference number and instructions on how to set up your Government Gateway account. You will then be able to use the HMRC Self Assessment online service to submit your return.
What you need to complete your return
You should have all your paperwork together so you enter the correct information when completing your self-assessment. This may include a P60 form from your employer showing your income and the tax you’ve paid, a P45 form if you have left a job within the tax year, a P11 D detailing any benefits or expenses. Also, details of interest on bank and building society accounts, dividends from investments and any other income you receive.
Paying what you owe
You must pay your tax bill by 31st January. If want to spread your payments over time, you can set up a Budget Payment plan to make regular monthly or weekly payments towards your next tax bill. If you miss the tax deadline or know you will not be able to pay on time, you might be able to pay off your latest bill in instalments under a HMRC’s Time to Pay arrangement.
Payments on account
Under the self assessment system, tax returns are submitted for tax years rather than calendar years and this is done in arrears. Each tax year there are two payments on account due, each equal to 50% of the relevant tax charge for the previous tax year. The first one is payable on 31st January within the tax year, and the second one by 31st July after the tax year has ended.
Penalties if you are late
If you miss the deadline, you will be charged a penalty of £100, with a further £10 added every day after that up to 90 days, plus interest on the tax unpaid.
Self assessment to go digital
From April 2024 HMRC’s Making Tax Digital for Income Tax will apply to all self employed and landlords with annual gross income above £10,000. Under the scheme, all affected individuals will need to store records of their business income and expenses in digital format and report a summary profit report to HMRC once every three months. The tax return will still be required but this will be known as the End of Period Statement.
Keeping good records
If you currently use a desktop bookkeeping system or do not use any form of software to keep track of your income and expenses, you will need to consider changing to MTD-compatible software. There are many online accounting products on the market fit for this purpose, such as Xero or Quickbooks Online.
You’ll also benefit from having up-to-date financial information for better decision-making.