Do you have to file a tax return that you know nothing about?

With just seven days to go, nearly four million people have yet to file their tax returns.

HM Revenue & Customs estimates that more than 12.1 million people need to file a tax return for the 2022-2023 tax year by January 31, but only 8.3 million people have done so so far.

This year, more taxpayers will have to file tax returns for the first time thanks to the freeze on tax thresholds and tax exemptions.

If you’re among the 3.8 million, there’s no need to panic; there’s still time to get your taxes in order, as long as you take action now. If you miss the deadline you will automatically face a £100 fine.

Who must file a tax return? What if you didn’t realize you needed to submit one? And which pitfalls should you watch out for?

Money Mail asks the experts…

Do I have to file a tax return?

There are many different reasons why you may need to file a tax return for the 2022-2023 tax year, such as if you:

• You earned more than £100,000 between April 6, 2022 and April 2, 2023, even if you had a full-time job. This will no longer be the case from April 2024, when the threshold will rise to an income of £150,000 per year.
• Run your own business or work for yourself and earned over £1,000 during the 2022-2023 tax year.
• Were a partner in a general partnership, such as an accounting practice.
• Earned income abroad, or lived abroad and earned income in the UK.
• Earned more than £1,000 renting out property or running a holiday home, including through Airbnb.
• We had a job, but used your own money to travel and pay other work expenses. You may be able to claim a tax reduction.
• Need to claim tax relief, for example on pension contributions paid from your after-tax income.
• Earned more than €50,000 while you or your partner applied for child benefit.
• You want to claim a tax credit for donations to charity (if you are a higher rate taxpayer).
• Earned more than £2,000 from shares or fund dividends. Be careful when filing next year’s tax returns: this allowance has been halved to £1,000 since April 2023.
• Income earned from a trust. Beneficiaries of a person’s estate must pay inheritance tax on any assets exceeding the £325,000 allowance.
• You want to transfer your tax-free personal allowance to your spouse.

If you are still unsure whether you need to file a tax return, visit: gov.uk/check-if-you-need-tax-return

What if I didn’t know I had to submit one?

If you didn’t realize you owed tax, or needed to claim back an exemption, then that’s not relevant to HMRC: the responsibility is on you to declare your income.

And many who don’t realize they need to file tax returns are likely to get caught out this year, warns Dawn Register, tax specialist at accountancy firm BDO.

Frozen thresholds for allowances on income, savings interest, dividend income and child benefit will push thousands of people to pay higher taxes – and many may have to file tax returns for the first time as a result.

Ms Register says: ‘Common sense doesn’t necessarily apply, so make sure you check your eligibility carefully. There are many counter-intuitive aspects of the UK tax system.”

For example, working parents with a high income must file a tax return to repay the child benefit received.

Parents earning up to £50,000 are entitled to the full benefit of more than £2,000 per year for two children. But after £50,000 the benefit ends and people lose it completely if they earn more than £60,000.

The parent with the higher income is responsible for paying the tax and must do so through self-assessment or risk a fine.

Another common pitfall is not filing a tax return after selling a second home when capital gains tax is due, says Ms Register.

Likewise, anyone selling second-hand clothes on Vinted or throwing away old camera and film equipment on eBay will come under increased scrutiny from the tax authorities. Those who earn more than £1,000 a year from this activity must pay tax on their income.

From January 1, HM Revenue & Customs has required digital platforms to collect information about how much users earn.

This means you need to be transparent and may have to file tax returns in the future or you will be fined. Companies will be asked to share data on sellers who carry out more than thirty transactions or € 2,000 per year.

You can earn up to £1,000 in extra income each tax year from hobbies or side activities you do outside of work.

In addition, you must register as a self-employed person and submit your own tax return at the end of the financial year.

However, HMRC say that people who sell assets they no longer want are unlikely to owe tax if it is a one-off and you don’t make a profit – and it sold for less than £6,000.

From next year, HMRC will proactively use platforms’ data to identify those they suspect should be paying tax.

However, nothing has changed to the rules themselves, so you will need to declare your income and pay tax by next Wednesday if you have made more than £1,000 in profits from selling goods online.

The tax you pay on your savings interest is also another topic that is becoming increasingly important this year. Savers must ensure that the interest they earn is correctly declared and accounted for.

This is because above a certain threshold, the interest you earn is taxable at your marginal rate.

Basic rate and higher rate taxpayers can earn £1,000 or £500 of interest tax-free respectively. Taxpayers with an additional rate pay tax on all their interest.

When you file a tax return, you must declare the interest on your savings.

Savers registered for PAYE automatically pay savings tax through an adjustment to their tax code. This includes savers who have an employer or receive the state pension.

Savings providers all inform HMRC about the interest you have earned. However, if you have earned €10,000 or more (before tax) from savings, investments, shares or dividends, you must file a tax return.

What should I do if I miss the deadline?

Anyone who misses the January 31 deadline will automatically be fined £100. After three months, you will face additional daily fines of £10, up to a maximum of £900. If you don’t file a tax return for a whole year, you could face a bill of £1,600.

HMRC also charges 7.75 per cent interest on late payments. This rate is determined by the basic rate plus 2.5 percentage points.

For example, if you filed and paid your tax six months and one day late last year and owed £5,000 in taxes, you would have incurred a late filing penalty of £1,300, a 5 percent late payment penalty to value of £250 and default interest of £165.48.

This means that your total tax bill has increased by € 1,715. However, the bill will be bigger if you file late this year because interest rates have increased.

Last year, taxpayers were charged £80m in interest on late self-assessment payments – up from £63m in 2020-21, according to analysis of official figures by accountancy group UHY Hacker Young.

Neela Chauhan, tax partner at the group, says: ‘It is more important than ever to file your own tax return and pay your bill on time, otherwise you will face the highest payment delays since 2007.’

Interest charges for late payments have risen dramatically in line with rising interest rates, from 2.75 percent two years ago.

If you have made a mistake, you can correct your tax return within 12 months of the self-assessment deadline by making an amendment online or sending another paper return. You must wait three days after filing before you can update your return.

You normally don’t need to file a tax return if all your income is taxed under PAYE, you earned less than £100,000, you don’t generate any other income that might be taxable – and you don’t claim any exemptions, subsidies or expenses from HMRC.

If you earn less than €1,000 per year in additional income, you do not need to send a tax return.

j.beard@dailymail.co.uk