There are just 3 months left until the deadline for submission of your tax return for 2019-20. Late and non submission will incur penalties starting at £100 and will increase if the return is over 3 months late.
During this year the importance of submitting tax returns on time became clear because those who hadn't weren't able to receive the SEISS grant which was based on tax returns submitted in previous years.
So how do you know if you need to complete a tax return?
You will need to complete a return if, for example,:
- You are a sole trader and your turnover (income) for the year is more than £1,000
- You are a partner in a business partnership
- You have untaxed income (excluding wages and pension) such as property rental, interest on savings, tips or commission
- You or your partner have received Child Benefit and you earn over £50,000
More importantly, if HMRC send you a notification to complete a tax return you must complete it or contact them to find out why they have sent it if you don't think you have to fill one in. Do not ignore it. HMRC will keep sending reminders to you to complete a return and penalties will be incurred until you do so or they agree you don't have to complete one.
Register to complete a return
You will need to register with HMRC to complete a return and will need to do this at least 20 working days before the deadline. A tax return is due for the 12 months from 6th April to 5 April and must be submitted by 31 January the following year.
You can find out more about registering on the HMRC website.
Completing your self assessment tax return
The return can easily be completed online but you will need to gather information and your accounts records first so that you have all the information to hand.
You may not have been trading for a full year but if you choose 5 April (or 31 March for ease) as your year end you will declare your income and allowable expenses for the period within the 12 months that you have been trading.
The online return will ask you several questions at the beginning in order that the appropriate pages of the tax return for the income you are declaring are available for you to complete.
Paying your tax
The advantage of being able to complete your return online is that you can see immediately how much tax you will have to pay. And, of course, the earlier you complete your return the longer you will have to prepare for the tax payment. The deadline for paying any tax due is the same as the return filing date - 31st January.
If you are unable to pay the tax due don't ignore it. Interest will be payable on late payments and you will incur late payment penalties after 30 days, 6 months and 12 months unless you have agreed a payment plan with HMRC. If you have tax due of £30,000 or less you can set up a Time to Pay arrangement through your HMRC Government Gateway account. Alternatively a telephone call to HMRC Self Assessment Helpline (0300 200 3822) will enable you to make arrangements to pay the tax due over an agreed period of time.
Submit your tax return for 2019-20 by 31st January 2021 to avoid incurring penalties and adding unnecessary costs to your tax bill. You may even find you are due a tax refund if your income has been lower than in previous years and you have made a payment on account based on higher earnings previously.
If you didn't pay your 31st July payment on account, which you were entitled to defer due to COVID-19, be aware that this is due by 31 January 2021 and therefore you may have more tax to pay than you may have expected. If you need to set up a Time to Pay arrangement with HMRC this shouldn't be left until the deadline has passed or even close to the deadline as you will be one of many trying to get through to HMRC at the same time to make the same arrangement.