It’s that time of year once again. The 2019/20 self-assessment season is in full swing ahead of the midnight deadline on (or before) 31 January 2021.
After the year we’ve all had, it can almost be forgiven that more people than usual might have forgotten about filing their personal tax return.
HMRC won’t accept that excuse, though, despite many sole traders and business partnerships carrying an additional financial burden due to COVID-19.
As fate would have it, the 2018/19 deadline on 31 January 2020 also saw the UK’s first confirmed cases of the coronavirus that was to define the year ahead.
By the same date, more than 11.1 million people had filed personal tax returns for 2018/19 through self-assessment. That included 3,003 on Christmas Day and 702,171 on deadline day itself.
Who needs to pay?
The following individuals need to file 2019/20 tax returns through self-assessment on or before 31 January 2021:
- Landlords who earned more than £2,500 from renting out property.
- People who received, or their partner received, child benefit and either of them has annual income of more than £50,000.
- Those who received more than £2,500 in other untaxed income, for example from tips or commission.
- Sole traders or business partners with annual turnover of more than £1,000.
- Employees who are claiming expenses in excess of £2,500.
- Anyone with annual income of more than £100,000.
- Anyone who earned income from abroad that they need to pay tax on.
How to file a tax return
More than 10.4m tax returns were filed online last year, either by taxpayers themselves or by accountants like us who acted on their behalf.
The deadline for paper submissions came and went on 31 October 2020, so online submission is the only option to beat the 31 January 2021 deadline.
If you’re filing your own tax return, you’ll need all the relevant records and your Government Gateway ID to sign into HMRC’s online portal.
Typically, most people filing a tax return use bank statements, receipts and invoices to document money going in and out of the business.
An increasing number of people are using cloud accounting software for this purpose as it ensures the level of accuracy HMRC requires with less effort.
How to pay
Usually, the first instalment of a tax bill is due to be paid by midnight on 31 January. Due to the pandemic, things are a little different this year.
Once taxpayers have completed their 2019/20 tax return, and know how much tax is owed, they can set up their own payment plan online to help spread the cost of their tax liabilities, up to the value of £30,000.
To be eligible for this:
- The tax bill must owe £30,000 or less
- The taxpayer must have no other payment plans or debts with HMRC
- Previous tax returns are up-to-date
- The payment plan is setup less than 60 days after the payment deadline
Late-payment penalties
If you don’t file by midnight on 31 January 2021, you’ll immediately be slapped with a £100 fixed late filing penalty.
File three months late and you’ll face additional daily penalties of £10 for each day after that second deadline – up to a maximum of £900 on top of the initial £100 fixed penalty.
After six months, then 12 months, the screw gets turned tighter with extra charges of 5% of the tax outstanding or £300, whichever is greater.
That’s on top of those earlier penalties incurred – and there are further penalties and interest for the late payment of tax.
We handle every aspect of self-assessment.