Sitting down to do your tax return the day before it is due and then being frozen out of your account because you have lost your password or the system fails is the stuff of nightmares for many taxpayers.
And that’s why millions of people will be trying not to leave it too late this year, especially when they have to deal with a tax office that has been struggling to deal with a backlog of queries ever since the pandemic. Waiting times on the self-assessment helpline soared from an average of five minutes in 2017 to almost 20 minutes last year. The number of abandoned calls doubled from 300,000 to 600,000 in five years, Money researchers found.
More than 12 million self-employed workers, high-earners and landlords have to complete their self-assessment tax return by January 31.
According to HM Revenue & Customs, some 3,275 people were so keen to get it done that they filed their return on Christmas Day. Another 10,311 completed theirs on Boxing Day.
Anyone who did need help with their tax return on Christmas Eve would have at least enjoyed a relatively short wait to get through on the phone to HMRC. According to our analysis, the average waiting time on December 24 was just one minute 44 seconds, compared to about eight minutes during January. New Year’s Eve was also a good time to try to get through.
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For those who didn’t manage to do their return in between the turkey and Auld Lang Syne, here’s what you need to know, and the traps to avoid.
Who needs to fill in a return?
Self-employed workers, landlords and employees who earn more than £100,000 need to complete a return. Child benefit claimants, savers and regular charity donors may also need to fill one in. The paper deadline for the 2021-22 tax year was October 31. The online deadline is the end of January.
If you get more than £10,000 a year income from savings interest or investments you will need to file a return. The same is true if you earn more than £2,000 from dividends or make capital gains above £12,300 in a year. This could apply to gains made from assets such as property, art or crypto- currency.
Anyone who gets more than £10,000 a year from savings interest or investments or more than £2,000 from dividends should file a return too.
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Donations to charity recieve 25 per cent Gift Aid which the government pays to the charity. Higher-rate taxpayers can then claim tax relief on the entire donation, including the Gift Aid, at 20 per cent. Additional rate taxpayers can claim 25 per cent. This can only be done through a self-assessment form and you cannot claim back more than the total amount you pay in tax.
If in doubt, seek guidance from HMRC or a tax adviser.
Anything else to consider?
Self-employed workers who received Covid-19 support in the 2021-22 tax year must declare any grants they were paid.
Workers can claim tax relief of £6 a week to cover additional costs if they have been working from home. Robert Salter, a director at the tax firm Blick Rothenberg, said: “If you’re self-employed, these costs can be deducted as an allowable business expense. If you have worked 25 hours a month from home, the allowable amount is £10, working 51 hours or more gives you £18, and 101 or more is £26.”
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Employees may also be able to claim back expenses if they have had to pay to set up a home office, for example. You’ll need a P87 form to do this and will not have to do a self-assessment return purely for that. You can claim only for expenses that are “wholly, exclusively and necessarily” related to your role, however, so home broadband wouldn’t qualify unless you can prove that you use it solely for work. A desk chair, office furniture and stationery would count.
What you’ll need
If you are filing online you will need a login to the Government Gateway website and a Unique Taxpayer Reference. If you don’t have these, make sure you allow plenty of time for them to be sent. You will need your national insurance number.
Make sure you have details of your income from the tax year, including earnings from self-employment, any dividends received or interest on shares or savings. Ensure you have records of any work-related expenses.
After you complete your return HMRC will calculate the tax that you owe and you have to pay by midnight on January 31. If you make advance payments towards your next bill, known as “payments on account”, they will be due by July 31.
What if I miss the deadline?
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If you’re late in filing your return, you’ll get an immediate fine of £100. If you fail to complete it by April 30, you will get an additional penalty of £10 a day up to a 90-day maximum of £900.
Those who are six months late are usually fined £300 or 5 per cent of the tax owed, whichever is higher. If you are a year late, you will be charged this amount again.
HMRC charges interest on these fines and also on any unpaid tax — 6 per cent from January 6, which is made up of the Bank of England base rate of 3.5 per cent, plus 2.5 percentage points. The rate changes a month after any increases in the Bank of England base rate, which went up in December.
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Some of the most common ways of messing up the form include using an incorrect Unique Taxpayer Reference number, reporting income from the wrong tax year, and failing to tell HMRC that you no longer need to file a return.
What if I have an excuse?
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HMRC will take into account “reasonable excuses” and said it would be more lenient if you get in touch before January 31 to let it know that you have a problem. There is no strict definition of what counts as a reasonable excuse but it should be something measurable and noteworthy such as a serious illness, bereavement or flood or fire in your home.
Bizarre excuses given to the taxman have included “my dog ate the post”, “I’m a DJ and was too busy with my party lifestyle”, and “my mother-in-law is a witch and put a curse on me”.
These appeals were all unsuccessful.
