Were you one of the 3,275 people who filed their January tax return on Christmas Day? Former accountant and Daily Telegraph writer Mike Warburton was. He wasn’t filing his own return, but those of family members. He also has some very good tips and identifies seven mistakes to avoid on your tax return.
If you haven’t yet filed your January tax return, don’t worry. You still have time. However, if THP calculates and files your Self-Assessment Tax Return, please make sure we have your financial information in good time. As you can imagine, January is a hugely busy time for accountants!
When is the January tax return deadline?
If you normally submit a paper tax return, then you’ve already missed the 31st October deadline. If this is the case, you’ll need to submit your tax return online.
The deadline for submitting your tax return online is midnight on 31st January. Many people leave this until the last minute, but we strongly advise against this. In some previous years, HMRC’s online systems have buckled under high demand. Also, using an accountant to prepare and submit your returns in good time can often save you money. This is because they are likely to know of extra reliefs and expenses you can claim.
When is the payment deadline?
Whether you submit your Self-Assessment Tax Return on paper or online, you have until midnight on 31st January to pay any tax you owe.
Benefits of filing your tax return on time
If you file and pay your tax return on time, you avoid penalties and interest. Penalties start at £100 for missing the filing date. If you don’t file over the next 12 months, the penalties can rack up to some £2,000. At this point, HMRC may in some cases even apply a ‘super penalty’ of 200% of tax owed. The longer you leave it, the more you’ll pay – and this is before taking into account interest on your unpaid tax (see below).
One other benefit of filing your tax return on time is that it (in most cases) restricts the amount of time HMRC has to open an inquiry into your return. Normally the taxman can only open an inquiry up to 12 months after you file your return. If you file late, HMRC has until the next quarter day after the first anniversary of your filing date. So, if you file your return on 5th February 2023, the taxman has until April 30th 2024 to open any inquiry into your return.
Interest on late payment going up
If you pay your income tax late, you have to pay interest on the outstanding amount.
Currently, you have to pay interest at the Bank of England base rate, plus 2.5%. Because the Bank of England has been increasing the base rate in a bid to get inflation under control, this means late payment is getting more and more expensive.
To illustrate, the current interest rate you’ll pay is 6% (base rate of 3.5% plus an additional 2.5%). As recently as January 2022, you would have paid only 2.75% (the base rate was then only 0.25%). Predictions suggest that the Bank is likely to keep increasing rates over the coming months, meaning late tax will cost you even more.
Next year, avoid the January tax return rush
If you currently complete your own tax returns, you can avoid the rush next year by asking THP to take care of them for you. We can even offer free cloud accounting software for sole traders and landlords, making it easier for you to do your books and get ready for Making Tax Digital. If you’d like to learn how we can help, get in touch today. One of our accountants would be delighted to tell you more.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.