You’re not alone. As usual, millions of taxpayers haven’t yet filed their self assessment tax returns with HMRC. By the end of December 2018, 5.5million were yet to complete it. And in December 2019, there were 5.4 million still to do.
But that’s OK. The deadline is 11.59pm on the 31st January 2021. That’s when your 2019-20 tax return must be with HMRC. It’s also when you must have settled any payments on account that were postponed from July.
Why is it important to pay attention to HMRC’s deadlines?
Apart from the ever present fear of doing the wrong thing hovering in the background, the main reason to pay attention to HMRC deadlines is money. Your money.
You will be fined if you miss the deadlines and absolutely no one has money to throw away unnecessarily at the moment. There’s an immediate fine and then cumulative additional penalties the longer you leave it. There are separate fines for missing the tax return filing deadline and for not paying your tax bill on time.
You don’t want this.
Time to Pay Payment Plan for tax bills
As part of HMRC’s effort to support people through the adverse financial effects of the COVID-19 pandemic, they have introduced a way to pay your tax bill in instalments. This is as well as allowing for a postponement of July’s payments on account.
It’s called a Time to Pay payment plan and can be set up online. The main eligibility criteria are:
- Your 2019-20 tax return is with HMRC by the deadline.
- Your tax bill for the year is under £30,000.
- All your other affairs involving HMRC are up to date and paid in full. This means that all your previous tax returns were filed properly and you don’t owe HMRC money for any other taxes, for example VAT.
- You have a Government Gateway ID (this is how you access the online application).
The Time to Pay scheme means that your total tax bill is divided up into 12 instalments between January 2021 and January 2022. On January 31st 2022, the entire balance must be paid. There is a 2.6% interest fee added to your overall bill.
What if my tax bill is over £30,000?
If your tax bill is over £30,000 and you aren’t able to pay it in full, you need to get in touch with HMRC’s Payment Support Service on 0300 200 3835. They will help you construct an alternative plan of instalments, if they can. It’s in HMRC’s best interest to make payments as manageable as possible and takes some of the pressure off businesses that are under enormous strain.
I’ve been hearing about a working from home tax rebate, can I claim?
The first question to answer is: were you told you had to work from home, or did you choose it? If you decided to work from home, then the working from home tax rebate doesn’t apply.
But if, like many people during lockdown, your employer told you to work from home, then you can apply. You are also eligible if you are self employed and work from home as a matter of course.
At this point, bear in mind that the first lockdown started on 23rd March 2020. Your 2019-20 tax return time period ends on 5th April 2020. So only a small proportion of your working from home entitlement goes on your 2019-20 tax return. The rest will be for your 2020-21 self assessment.
If your company pays you expenses for working remotely (and the expenses are not taxed), that makes you ineligible for the tax rebate because you have already been compensated.
Claiming this, and other, work expenses and tax reliefs is a little confusing. The rules apply to all UK taxpayers both employed and self employed. But the way you claim is different, depending on your circumstances. And for some people this means applying as part of your self assessment tax return.
Let’s see if we can untangle it for you:
- You’re employed, your employer told you to work from home and you don’t usually fill in a self assessment tax return you should use the new HMRC online portal to make your working from home tax rebate claim.
- You’re self employed or employed and usually fill in a tax return, you have two options:
- Claim the flat rate of working from home tax rebate on your tax return in the ‘other expenses and capital allowances’ box.
- Claim a working from home tax rebate based on your actual costs on your tax return in the other expenses and capital allowances box.
You cannot use the new portal if you fill in a self assessment tax return.
Which is better, a flat rate claim or one based on my actual expenses?
Well, it’s a best fit situation. You have to decide which is best for your situation.
- The flat rate is the simplest way to claim and you don’t need any receipts to support it. It assumes that it costs you an extra £6 per week to work at home. So you get tax relief, based on the highest rate of tax you pay, on that amount. As a Basic Rate Taxpayer, that’s £1.20 per week (20% of £6.00) . And £2.40 per week for a Higher Rate taxpayer (40% of £6.00.)
- If your costs are substantial more than that, you can make a more detailed claim involving those specific figures. But you will need receipts and other proofs of purchase as evidence for your claim. If your claim is accepted, you will receive tax relief at the highest rate of tax you pay (20%, 40% or 45%).
Essentially, if you don’t have any evidence, you need to apply for the flat rate amount.
Do I need to fill in a self assessment tax return?
Always a good idea to check your status, as there was a ‘first year’ for everyone. Things can get a bit tricky if you’re both employed and self employed simultaneously. For everyone, it’s a good idea to double check everything with your accountant or tax professional.
Generally, if you fall into one of these categories, you’ll need to submit a self assessment tax return:
- You make an annual turnover of over £1,000 as a self employed sole trader.
- You own property and earn over £2,500 in rental income.
- You get over £2,500 in untaxed income, like commission payments or tips.
- Your annual earnings are over £100,000.
- You claim employee expenses of over £2,500.
- You earn income abroad that’s taxable in the UK.
- You or your partner get child benefit and one of you earns over £50,000 a year.
Main takeaways
- Whatever you do, don’t waste any money paying HMRC fines for missing deadlines.
- Deadline for your 2019-20 self assessment tax return is 11:59pm, 31st January 2021.
- You can claim work expenses, including working from home tax relief, as part of your tax return.
- HMRC have introduced a way to pay your tax bill in instalments, but you need to meet the criteria and get it set up properly.
