The sun is shining, and we all have more freedoms than we did 12 months ago. The last thing on your mind will be that dreaded Self Assessment tax return. However, we are going to try in a few words to bring that lovely return back into your focus and help make it less of a chore!
Once the 5th April has come and gone it is never too early to start gathering the information that you need to complete your tax return. You don’t really want to be one of the thousands who file on Christmas Day 2021. The good news is that once it is out of the way you don’t need to think about it again until April 2022. Better still, if you file early you don’t need to pay the tax until the deadline and will have time to save rather than trying to find the funds in January. Best of all is a tax refund as HMRC will usually refund you within a few weeks of filing the return.
Ready to get started? Take a look at the Five Step Plan below for how to keep your Self Assessment Tax Return worry free!
Step One – Decide whether you need to file.
Firstly, decide if you need to complete a return for the tax year. If you filed one last year that does not necessarily mean that you need to file one this year and vice versa. The pandemic has caused us all to introduce changes to our lifestyles, finances and the way we work. Any of these can affect whether you should be filing a tax return.
Consider whether you fall into one or more of the following groups who must complete a return:
- Self Employed
- Company Director
- Partner in a business partnership
- Received foreign income
- In receipt of any untaxed income
If you filed in 2019/20 but don’t believe you need to file for 2020/2021 then contact HMRC. Explain why and, if they agree, get them to confirm in writing. If HMRC don’t confirm, they will be expecting a return and will penalise you if you fail to submit.
HMRC tends to send out a reminder letter just after 5th April each year. The reminder usually looks worryingly as if you are late filing something. Read the letter carefully. You should find that it is for the tax year just ended, 2020/2021, and only a reminder. If it is for a previous tax year check if you have already filed a return and your filing receipt reference or consider why HMRC think you should file. Then challenge the demand and/or get it completed ASAP.
If you are new to self-employment make sure you register for Self Assessment by 5th October following the end of the tax year in which you started trading (5th October 2021 for the 2020/21 tax year). HMRC should send you your Unique Tax Reference (UTR) which you will need to file your return.
Step Two – Gather your information and documents
If you do need to file now is the time to gather your tax documents. If possible, use a checklist and your previous year’s tax return as a reminder. Different schedules and letters should start arriving after 5th April as organisations complete their tax year ends. So, for example if you have employment your employer is required to send your P60 before 31st May and a P11d, if necessary, by 6th July
Now is also the time to request any missing information. You may, for example, need copies of interest statements. These are no longer sent out automatically since interest stopped being taxed at source in April 2016. Information can be slow to arrive or may be incorrect and you have to start again. The closer you get to the filing deadline the more stressful this can be!
Step Three – Prepare self-employed accounts
If you are self-employed you will need to compile trading accounts. Hopefully you have been keeping at least a paper file with all those important documents in it. This is the time to sort those invoices, receipts and bank statements before your accounts are completed. Remember it is worth getting your information in some sort of order before handing it over to your accountant. The more preparation work you do the lower your accountancy fee should be.
If you are unsure how to complete your accounts and return, do consider appointing a qualified accountant to assist you. Recent HMRC concessions for 2020/21, such as on home office allowance, may have slipped your notice. Errors can be costly, and a good accountant should be able to review your information and suggest tax savings that you may not have thought about.
Step Four – Do you need to consider anything with regard to the COVID-19 pandemic?
2020/2021 has been a difficult and unusual year for us all. This has been reflected in the tax system with a number of government grants and allowances being both taxable and tax free. Any furlough received should be included in your P60 figures and taxed through your PAYE employment. Self Employment Income Support Scheme (SEISS) grants should be included separately on your tax return. HMRC has already rejected numerous 2020/21 tax returns where the SEISS figures do not agree to their records.
Even if you have completed your own returns in the past the 2020/2021 year may be one where it is advisable to seek professional help. A qualified accountant should be up-to-date with all the latest changes which takes the pressure off you!
Step Five – Complete, File and pay
Now you have all the information to ensure it is all correctly recorded on the return. Whether you provide the information to an accountant, or fill the return in yourself, you need to check you are happy that everything is correct. Remember the completion is your responsibility.
The 2020/2021 tax return deadlines currently remain as:
- Paper return filing by 31 October 2021.
- Online return filing by 31 January 2022.
Once your return is prepared and you are happy it is correct don’t forget to file and pay any tax due! All tax due for 2020/2021 must be cleared funds with HMRC by 31 January 2022.
If you received any penalties for 2019/2020 returns, they may be worth a review. There was a lot of confusion regarding the 2019/2020 deadline with HMRC initially refusing to delay. However, on the 25th January 2021, with a filing deadline of 31st January 2021, HMRC announced a penalty concession whereby no late filing penalties were charged up to 28th February 2021.
Even if you were unable to file your 2019/2020 return by the 28th February 2021, you may still be able to appeal the late filing penalty if you had a reasonable excuse, which includes being affected by COVID-19. The penalty period for 2019/20 has also been extended from 30 days to 90 days due to issues with communication during the pandemic.
So, dust off those documents, find your Unique Tax Reference, and sort out your 2020/2021 tax return well before the deadline! Then sit back and enjoy the sunshine.
START PLANNING YOUR TAX RETURN NOW
Need help with your Self Assessment? Contact our accounting specialists at ForemansLLP on 01244 625 500 or email email@example.com.