The deadline for submitting your self-assessment tax return online is 31 January. But if you expect to owe tax why should you consider submitting your return earlier?
Deadlines and penalties. You probably know that if you’ve not already submitted your self-assessment tax return for 2021/22 you must do so by midnight on 31 January 2023 or HMRC will charge you a £100 penalty.
Late payment. 31 January is also the deadline for paying any tax you owe for 2021/22. If that exceeds £1,000 you may also have to pay an amount on account of your 2022/23 tax bill, equal to 50% of the amount for 2021/22. For example, if your 2021/22 tax bill is £1,500, your payment on account for 2022/23 is £750 and the total due on 31 January is £2,250. Trap. For each day you’re late with your payment HMRC will charge simple interest at 5.5% per annum. If you’re more than 30 days late a penalty of 5% applies to any 2021/22 tax. If, as in our previous example, you owed £1,500 for 2021/22 and hadn’t paid any of it by 3 February 2023, the penalty would be £75.
Reduce the penalty. Any payment you make against the total tax due on 31 January must be knocked off the 2021/22 part of your bill first so that it reduces the penalty. If, say, your tax bill for 31 January is £2,250 (£1,500 for 2021/22 and £750 on account for 2022/23) and you pay £500 before 3 March, the late payment penalty will be £50 ((£1,500 – £500) x 5%). Tip. If you pay tax through PAYE you might be entitled to defer payment of your 2021/22 tax and avoid a penalty. To take advantage of this HMRC must receive your online tax return by no later than 30 December 2022.
Spread the bill. If you meet the December deadline, owe tax of no more than £2,999.99 for 2021/22 and have earnings or pensions to which PAYE applies, HMRC should automatically spread the tax payment over twelve months by collecting it from your salary. Tip. If you just make the 30 December deadline HMRC may not spread your tax payments. Phoning HMRC is the quickest way to rectify this .
If you owe tax for 2021/22 and receive income liable to PAYE, you can ask HMRC to spread the tax bill by deducting it from your salary over twelve months. For this tax break to apply you must submit your tax return by 30 December 2022.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.