31 January is the deadline for everyone who uses Self-Assessment to file a tax return for the tax year running from April 2019 to April 2020. It’s also the deadline for anyone who owes money to HMRC to pay their tax bill.
While it is important to pay the tax you owe, there’s no need to pay more than you have to, and not everyone is aware of the different tax breaks available that can help them to avoid a larger-than-necessary bill.
Here are five tips to help you fill in your form more effectively.
1. Understand the new coronavirus leniency rules
With the government estimating that one in 501 of us currently has Covid-19, and many others finding workloads increased due to lockdown or having children at home, it is a relief to know that HMRC understands the pressure.
The tax office announced last week that those who have a ‘reasonable excuse’ not to file their tax form on time will not be penalised, provided that they file “as soon as possible” after that. This could save many people facing a £100 fine. Excuses may include having to home-school children or care for someone vulnerable, as well as having the virus, or having an accountant who has had the virus. Although there are reports that Chancellor Rishi Sunak will move the entire deadline to the spring, at present the advice is that if you miss the deadline for coronavirus-related reasons, your fine will be waived if you appeal.2
2. Ensure you claim the reliefs you deserve
It can be easy to miss the necessary boxes to gain all of your tax relief, meaning that many people pay more tax than they need. Studies estimate that this is a particular problem with higher rate pension tax relief, with studies estimating that between 60 per cent and 80 per cent of this relief goes unclaimed.3
If you have made pension contributions and are a higher or additional rate taxpayer, make sure that you claim this and enter the gross value of contributions. - everything you pay in plus the 20 per cent basic rate tax relief on top.
If you give to charity and are a higher or additional rate taxpayer, you can also claim the extra Gift Aid tax relief on any charitable contributions, so go through these and ensure you include them on the form as well.
3. Use the work from home allowance
If you’ve worked from home this year because of coronavirus, you are able to claim back expenses for doing so, either as a flat £6 a week or by evidencing the cost increases from working from home on your tax return (this is a much more longwinded process so most people will be better off claiming the £6 weekly. You can do this on your online tax return when you enter your employment pay and tax details, by answering the question ‘Do you wish to claim any employment expenses or capital allowances while working for your employer’.
If you change this to yes, then it will open up the expenses section for you to complete in the following pages.
4. Amend past returns
If you haven’t claimed allowances for the last four years, including pensions tax relief and Gift Aid, you can do this while filing your current return, to ensure you don’t miss out on tax relief.
If you file your returns online you are able to do this by signing into your account and following the steps outlined here https://www.gov.uk/self-assessment-tax-returns/corrections, before filing the return again.
5. Make things easier for next year
If your tax bill seems big, or your tax form cumbersome, now is a good time to see whether you can operate in a more tax-efficient manner before filing next year’s return.
Some things to consider include moving savings and investments into an ISA to ensure they don’t attract Capital Gains Tax or tax on savings interest, as well as changing the makeup of your investments so they are more advantageous from a tax perspective, as well as considering making pension payments before the tax year ends on April 5. A financial adviser will be able to help you to structure your finances in a more tax efficient way to ensure that the process runs smoothly for the 2020-21 tax year.