Tax deadline: Last day to file return is today – here are last-minute ways to reduce your bill

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The self-employed and others who need to declare income to HMRC have just a few hours to complete a self-assessment declaration, before the deadline at midnight tonight.

On January 26, according to the administration of the tax authorities, almost 2.7 million people still had to file a return.

With just over 12 million taxpayers expected this year, that means more than one in five people have put off filing their returns until the last week.

Don’t wait any longer: the late tax penalties initially include a flat £100 penalty, which will apply even if no tax is due

What is the penalty for late tax returns?

Those who fail to meet today’s deadline risk an initial £100 fixed fine, which will apply even if no tax is due.

After three months, additional daily fines of £10 per day will be added, up to a maximum of £900.

Then after six months a new penalty of the higher of the five per cent of the tax owed or £300 is charged. After a year a further 5 per cent or £300 is added.

If someone files their tax return but doesn’t pay what they owe by the January 31 deadline, they’ll be charged 5 percent of the unpaid tax after 30 days, six months, and 12 months.

Trusha Shah, tax manager at accounting firm HW Fisher: ‘It is important that you complete your tax return on time.

‘If not, you will be fined £100 – and it will be increased if your return is more than three months late.

‘Especially if you are making a payment from abroad, you should allow extra time, as there are sometimes delays in processing.

“For more information on how to pay, or to set up a payment plan, visit HMRC’s website, which contains many useful resources.”

Do you need to complete a tax return?

Anyone who is self-employed and has received or earned untaxed income in excess of £1,000 must file a return for the 2021/22 tax year.

That includes those who earned £100,000 or more in the last tax year, or were a partner in a business partnership.

The tax year ran from April 6, 2021 through April 5, 2022.

It may also be necessary to file a tax return if you are not self-employed, but do have untaxed income. This includes income from a side business or freelance work, of renting a home, tips and commissions, income from savings, investments and dividends, or foreign income.

Some Covid-19 grants or aid payments may also need to be declared on a tax return.

It’s worth noting that people can choose to fill out a tax return to claim a reduction in income tax or prove they are self-employed to claim tax-free childcare or maternity benefits, for example.

For those receiving child benefit, if their income or their partner’s income exceeded £50,000 in the 2021/22 tax year, they may need to file a return and pay the Child benefit for high incomes.

The information you need to have at hand

Unique taxpayer reference

National insurance number

P60 and P45

Interest statements

Your total income and any income from assets, investments and shares

Details of your business expenses if you are self-employed

Any contributions to a charity or your pension

Can I still register for self-assessment?

The deadline for filing a paper tax return was October 31 last year, meaning those who have yet to file their self-assessment must do so online.

Those who are yet to register with HMRC for the first time will not meet the deadline. Actually, they should have registered on October 5 last year.

HMRC must send them a unique taxpayer reference number by post, which is required to set up a Government Gateway account. This is followed by another letter with an activation code.

Those already registered with HMRC can submit until 31 January midnight.

However, for many, it may take longer than they think, especially if they declare untaxed income from multiple sources.

Therefore, for those striving to complete it before tomorrow’s deadline, it would be unwise to leave it until the last hour.

“Gathering paperwork takes longer than you think,” says Shah. “If you’re employed, this includes your P60, which confirms the total tax you’ve paid on your income.

‘You also need an overview of the income and expenditure, which is on your P11D or P9D form.

“If you stopped working in the past tax year, you also need a P45 from your previous employer.”

More than 12 million customers are expected to file tax returns for tax year 2021 to 2022

How to reduce the tax due

1) Apply for tax relief on pension contributions

Those paying personal pension contributions are entitled to a reduction at their marginal tax rate.

People can typically pay up to £40,000 each year towards retirement and are entitled to tax relief unless they have reached their lifetime allowance of £1,073,100.

If they pay contributions directly to a personal pension rather than through a company plan or through salary sacrifice, they get a base rate tax credit at source — but they must claim the extra 20 percent or 25 percent through their tax returns.

2) Maximize your charitable giving

For those who have made a donation to a charity and signed the donation declaration, the government supplements the donation and gives the base rate tax credit due on it to the charity.

However, taxpayers with a higher and additional rate can also claim the difference between their highest tax rate (40 percent or 45 percent) and the basic rate of 20 percent over the total value of a gift made.

3) Apply for child benefit

Once someone starts earning £50,000 a year, child benefit begins to be withdrawn. This benefit pays £1,133 per year for a first child and £751 per additional child.

People get no child benefit at all if the income of the top earner in a household reaches £60,000.

If someone’s income is between £50,000 and £60,000 then the tax is less than the full amount of child benefit and gradually rises to 100 per cent as income reaches £60,000 and above.

Income includes taxable benefits from a job, such as a company car or health insurance.

If a person has previously paid the levy but their income has fallen during the year, for example due to leave, they may have paid too much tax through their wages and it is worth checking whether they are entitled on return.

4) Working from home or hybrid working

Those who regularly worked from home in 2021/22 can claim £6 per week as a tax deduction for the extra costs such as heating and lighting.

If they have not requested this during the year through their tax code PAYE, they can do so through a tax return.

5) Keep records

Do not forget to make a copy of the completed declaration and keep it in the file.

If someone is employed or retired, they must keep all paperwork for 22 months from the end of the tax year to which it relates.

If they are self-employed or rent out a property, they must keep all papers for five years and ten months.

How do you know if you have to file a tax return?

1) You are self-employed or a sole trader and you have earned at least £1000 in income in the last tax year

2) You are a partner in a general partnership

3) You are a director of a public limited company

4) You have earned tips or commissions worth £1000 or more

5) You have income from assets

6) You have income from foreign sources

7) You have income from savings, investments or dividends

8) You must claim tax relief, for example on pension contributions

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