Still haven’t done your tax return? Five expert tips for meeting the 31 January deadline

HMRC is still waiting for 4.9million people to file their 2019/20 tax return in time for the 31 January deadline.

So far 7.2million people have completed their self-assessment form, and HMRC said it expected the total figure to reach 12.1million.

If you file after the deadline, you will receive an automatic fine of £100. Last year, late taxpayers lost almost £100 million due to these fines. 

Those who fail to make the deadline due to Covid-19 can appeal against the late filing penalty, as long as they can prove they were negatively impacted.

‘We want to encourage as many people as possible to file on time, even if they can’t pay their tax straight away,’ said a spokesperson for HMRC.

‘Where a customer is unable to do so because of the impact of Covid-19, we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that.

‘Support is in place for those who may struggle to pay, with customers able to spread their payment liabilities of up to £30,000 over 12 months.’

This is Money asked Hannah Paterson, an accountant at online tax return service TaxScouts, and Lucy Cohen, co-founder of the tax advisory firm Mazuma, for their top tips on tackling your tax return before the end of this month. 

1) Don’t delay any longer  

Paterson said: HMRC are still being vague on what constitutes a Covid-related excuse, so we still urge people to meet the deadline if they are able to.

Sorting your tax return ahead of time is healthy for your financial planning and cashflow in 2021.

Knowing exactly what you’ll owe and ensuring it matches up with your actual income can help you plan for the year ahead, and reduce your advanced tax payments if necessary.

If this is your first time filling out a self-assessment tax return, you’ll have to register for your unique taxpayer reference code which you get via the government gateway. This can take up to 20 days, so get it done as soon as possible.

You’ll also need records of all expenditure and income between April 2019 and April 2020, so leave enough time to get organised.

2) Have your documents to hand before starting

Cohen said: It can feel like HMRC is asking you for blood, sweat and tears when doing your tax return, and the effort needed can be overwhelming.

Before you even download or open the form, make sure you have all your documents ready in front of you. 

You’ll also need details of your business expenses if you’re self employed, as well as any contributions you have made to charity or your pensions during the tax year.

Once you feel confident that you have all of these, now is the time to start filling out the form.

3) Make the most of all your tax allowances

Paterson said: Every year, millions of taxpayers ignore their tax allowances which leads to missed money-saving opportunities. 

For example, you can save £20,000 tax-free by saving or investing in an ISA every year.

You also have a £1,000 tax free interest allowance and a £2,000 tax free dividend allowance.

And if you’re married or in a civil partnership, and your spouse hasn’t earned enough in the year to use their full £12,500 tax free personal allowance, you can use the remainder of their allowance to lower your tax bill.

4) Keep records 

Cohen said: From time-to-time, HMRC may do random spot checks on individuals who complete self-assessment tax returns.

Because of these checks, it is important that you keep records for a minimum of five years after the 31 January filing deadline for that tax year. 

The records to keep include proof of all income, expenses, VAT, PAYE, any money you draw out of your business, as well as any grant claimed through the self-employment income support scheme. 

Choose a way to store your records that works for you and that will enable you to keep on top of it all.

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

5) Claim any relevant expenses 

Paterson said: If you are self-employed or a landlord, expenses related to your work or property can be deducted from your tax bill to save you money.

Obvious purchases such as laptops and equipment are rarely forgotten, but things like business memberships, fuel for your car and energy bills are ones to consider if they relate directly to your business.

If you don’t have a lot of expenses, you can still claim £1,000 as a tax-free allowance.  

Cohen said: Figuring out what you can and can’t claim as tax deductible can be baffling.

The test I always tell clients to use is the ‘wholly and exclusively’ test.

Was the expense you’re about to claim wholly and exclusively used for the purpose of your business; or would you have spent it anyway, even if you didn’t have a business?

For example, one expense people regularly attempt to claim for which will almost never get past HMRC is the TV licence in your home – you would have had a TV licence anyway regardless of your business.

But, a collection of practice music books used by a music teacher, or hundreds of kilos of cement for a builder are both much more likely to be wholly and exclusively used for business purposes.