Self Assessment deadline: FIVE things self-employed should note about January tax returns

Martin Lewis provides advice on self-assessment tax deadline

According to HMRC, some 11 million people complete a Self Assessment tax return every year. Although the tax return deadline is January 31, 2021, people have the option of submitting their tax returns earlier than this. But for those who have yet to submit their tax returns, spoke to self-employment experts to get their tips on this January’s tax deadline.

Check if you need to submit a tax return

Many people who are employed will have their tax and National Insurance deducted from their wages, but people who are self-employed will often need to submit a Self Assessment tax return.

Specialists from Chartered Accountancy practice, Sheards Accountancy, told “You must send a tax return if, in the last tax year (April 6 to April 5), you were self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on) or a partner in a business partnership.

“You will not usually need to send a return if your only income is from your wages or pension.

“But you may need to send one if you have any other untaxed income, such as money from renting out a property, tips and commission, income from savings, investments and dividends or foreign income.”

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Ask a professional for help

Many self-employed people get help from accountants to process their tax returns.

Chris Downing at Sage told “Don’t be afraid to ask for help, this can save a lot of time and risk.

“Accountants can often ‘pay for themselves’ – highlighting tax efficiencies can be worth more than the cost of their services.

“They can also spot potential mistakes, reducing the risk of you having to face an audit by HMRC and possible penalties for getting your tax return wrong.”

SEISS claims

Self-Employment Income Support Scheme (SEISS) grants have assisted a number of self-employed people over the last year, and while they do not need to be repaid they are considered taxable.

Kevin Winterburn, director at Sheards Accountancy, explained to “SEISS will have no impact on any tax returns being submitted this month.

“The first SEISS payments were made in Summer 2020 which relates to the 2020/21 tax year and the returns to be filed this month are for 2019/20.

“SEISS are subject to income tax and self-employment National Insurance contributions in the 2021/21 tax year.

“HMRC will provide specific boxes on the 2020/21 Self Assessment tax return for anyone who is reporting SEISS grants.”

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Penalties for missing the deadline

The Self Assessment deadline is midnight on Sunday, January 31, 2021.

Dan Stopp, UK Accounting Manager at Bokio, told people who submit their Self Assessment tax returns late could “face a £100 fine”, and further fines if there are more delays.

“HMRC can also impose fines if it thinks you’ve made careless or purposely misleading mistakes, so it’s worth giving yourself sufficient reviewing time to avoid being in a rush when filing your tax return.

“It’s important to know, however, that if you do miss the deadline for a reason that was out of your hands, you can appeal.

“For example, if you’ve been affected by the coronavirus pandemic and this has delayed your ability to file or pay your tax return, HMRC says it will consider this as what it calls ‘a reasonable excuse’.”

Keep documents in order

People filing a tax return will need an array of information to hand in order to submit their tax returns correctly.

Lucy Cohen, co-founder of Mazuma, explained to “From time to time, HMRC may do random spot checks on individuals who complete Self Assessment tax returns to help avoid fraudulent activity.

“Because of these checks, it is important that you keep records of all the following for a minimum of five years after the January 31 deadline for that tax year: income, expenses, VAT, PAYE, drawings and SEISS.

“It is preferable that you store these documents digitally via Drop Box or on the cloud.

“Not only does this mean your files can be stored safely and found easily, but you aren’t clogging up your computer memory either.

“However, if you aren’t keen on using tech, that’s absolutely fine.

“Find a way to store your records that works for you and you’re more likely to keep on top of it all.

“All proof of documents must be kept in a non-editable format like a picture or PDF format, this proves to HMRC that the numbers have not been tampered with or changed in any way and are compliant.”

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