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Yes, you can file without penalty until 28 February this year, but leaving it until the last minute is fraught with problems. If you are not registered with HMRC to complete your tax return online, you will need an activation code, which the website says will take up to 10 days to arrive. Even if that is in hand, you need to give yourself time to track down the right facts and figures, and to check that everything is correct.
“If you do end up doing it at the last minute you are more likely to make mistakes or miss out vital information,” says Kevin Sefton, the chief executive of the tax app untied. “Plus, if you need to get in touch with HMRC for any reason, it is more difficult the nearer the deadline you are.”
Make a list of your income streams …
Sefton advises writing a list of where your money comes from: “This could be money you earn through an employer, through self-employment, rental income, bank or building society interest or any recent dividend payments.”
The online form will prompt you to remember a lot of this but it’s worth going through your bank statements to see where money has come in from during the tax year in question.
Pull together annual statements for savings and current accounts, and any dividend statements. Terrible savings rates mean that you might not have to pay any tax on that income: if you otherwise earn less than £12,570 you can earn up to £5,000 in interest without being taxed. Above that, there are allowances for those earning less than £17,570, and a personal savings allowance, too. The personal savings allowance means basic rate taxpayers get their first £1,000 of interest tax-free, while higher-rate payers get their first £500 untaxed.
… And any outgoings
You might be able to offset some of your outgoings against earnings. If you have made a capital gain through selling shares or an investment property, you can use losses from the same or a previous tax year to reduce it – you will need to register both on your form.
For the self-employed, there are business expenses that can be claimed for including the cost of equipment and clothing. “Small business owners and the self-employed are often hesitant about claiming their full expenses, says Lee Murphy, the managing director of the Accountancy Partnership. “But this can mean paying more tax than you should.”
If you are an employee but have been forced to work from home because of the pandemic, you can make a claim for some of the associated expenses. For the 2021-22 tax year you can make an immediate claim for relief on £6 a week expenses online but if you did not do that for 2020-21 you do it in the employment section of the form.
Gather the information
If you have filed online before, a lot of the data will be saved in your account, including your unique taxpayer reference and national insurance number. If you are using the service for the first time you will need to dig out these details before you start. The online service gives you a list of the paperwork you might need to complete your form – this includes your P60 from your employer, if that applies, a P45 if you have left employment in the last year or a P11D or P9D, which shows any benefits and expenses you have been given through work. You will also need to find your tax code – this should have been sent to you by HMRC.
Remember to declare Covid schemes
The 2020-21 tax return will be the one in which you need to declare any help you received during the first year of the pandemic. HMRC says that more than 2.7 million people claimed at least one self-employment income support scheme payment before 5 April 2021 and these need to be declared before the deadline. The online service asks about Covid support and provides a section for you to fill in.
Include charitable giving
Higher-rate taxpayers who have given money to charity out of taxed income may be able to reduce their bill by claiming gift aid. You will need to have claimed gift aid when you made the donation, which would have boosted the charity’s coffers by 25p for every £1. On your form you claim the difference between basic and higher-rate tax. If you made a payment of £100 and the charity claimed 20%, you can claim the extra 20% of the total – £25. Regular monthly donations count, as long as you have signed up for gift aid, so include them. It’s possible you have forgotten how generous you were more than a year ago, so take a look back through emails – maybe search for the word donation or for the names of sites such as JustGiving, which you may have made a payment to. You can claim relief on donations made this tax year (you will need to remember not to claim them again).
Check your partner’s earnings if you claim child benefit
If you or your partner claims child benefit then HMRC will be interested in both partners’ earnings. If one partner earns more than £50,000 it will want some of the benefit paid back – the charge is tapered so that by the time one person earns £60,000 the whole lot must be repaid. The form asks if either of you claimed the benefit, and if your income is higher or lower than your partner’s. It makes no difference whether you are married or not.
Get help
There are lots of guides on HMRC’s website and elsewhere online, so if you are unsure how to fill in a particular part of the form you should be able to find advice.
It’s pretty unlikely you will find someone to take on your tax return this year, but if your financial affairs are complicated, it might be worth getting in a professional for next time – if you are self-employed you can even claim for the cost of employing your accountant.
Don’t fall for rebate scams
Once you have filed you can relax – but keep your wits about you. A common scam features a text or email telling people they are owed a tax rebate, and with the subject on your mind this could be the easiest time of year to fall for it. Ignore any messages asking you to give details to get your money back.
