Self Assessment guidance issued as deadline nears & a 'lumpy tax burden' hits freelancers

Asia's Tech News Daily

Self Assessment paper returns must be completed by October 31, while online returns must be done by January 31, 2022. Despite there still being time to act, new research from untied highlighted Briton may be “a nation of tax procrastinators.”

Last minute filings

Untied, the personal tax app, recently examined data from 2018/19 tax returns, which was the most recent year which did not have deadlines shifted due to coronavirus. Untied’s research found only a third of tax returns are filed by mid-October, even though individuals have already had eight and a half months to complete their self-assessment documentation.

The statistics, which were released to untied by HMRC under the Freedom of Information Act, showed that in a typical year, only a third (33 percent) of returns are filed by October 20. Almost half of all returns (43 percent) are filed in the month of January alone, in the last weeks before the deadline of midnight on January 31.

The same data also highlighted over 135,000 returns are filed during Christmas week, including just over 3,000 on Christmas Day, plus a further 17,000 on New Year’s Day (and over 700,000 on January 31).

Kevin Sefton, CEO of untied, the personal tax app, commented on the data.

Self Assessment guidance issued as deadline nears & a 'lumpy tax burden' hits freelancers
© GETTY Self-employed

“With two thirds of people still to file their returns, sole traders, property landlords and high earners will want to avoid the stress and potential penalties of leaving their tax returns to the last minute,” he said.

“HMRC has reported that it gets nearly 1,000 returns a day 14 months after the end of each annual deadline, and sometimes 500 a day 26 months after. The longer the delay in submitting the forms, the bigger the size of the penalties.

“There are three and a half months to go until the filing deadline and our advice is to start getting your taxes in order now. Taxes often feel overwhelming but the sooner you start, the better. Trying to get them in by the beginning of December gives you a little wiggle room if other things crop up.”

This year’s tax returns will be particularly important to manage correctly as coronavirus support measures will need to be factored in. For the self-employed, SEISS grants will need to be accounted for.

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Self-employed

Mr Sefton went on to provide guidance to these self-employed workers: “Our advice has always been to get ahead and tax control of your taxes. Many people will have received Covid support from HMRC – remember that all SEISS grants are taxable and need to be entered on your tax return in the appropriate section.

“Don’t leave tax returns until the last minute just in case something unforeseen crops up. If you file early, you can see what your bill is and this gives you time to budget. You can also amend your tax return to include anything that you might have forgotten.”

Recently, HMRC released tax figures for April-September 2021 and the data showed how tax burdens are split between employees and freelancers. Receipts from PAYE income tax and national insurance were £165.8 billion, up £18.2 billion in a year (11 percent). This is due to both a three percent rise in paid employees (836,000) and a rise in average pay of 5.3 percent from a year earlier and Hargreaves Lansdown detailed this reflected how many people were laid off in the first few months of the pandemic.

During the same period, receipts from self-assessment income tax, capital gains tax and national insurance were £14.4billion, up £7.6billion.

Self Assessment guidance issued as deadline nears & a 'lumpy tax burden' hits freelancers
© EXPRESS SEISS

Workers across the spectrum will likely have tax on their minds this week as Rishi Sunak delivers his Autumn Budget. As the Government struggles to cover the costs of coronavirus, many expect tax hikes will be on the horizon and Sarah Coles, a personal finance analyst at Hargreaves Lansdown, warned the self-employed in particular may feel this as they have already been hit the hardest.

“For most people, massive rises in tax over the past year look far worse than they actually are, but for self-employed people, the lumpy tax burden is taking a toll,” she said.

“The Treasury brought in rules which let self-employed people delay their first payment on account from July 2020 to January 2021. This was a lifeline at the time, because the first self-employment grant didn’t start paying out until the middle of May, and even then it excluded more than a million people, including those making profits of over £50,000 and those making less than half their income from self-employment.

“But deferring the payment left them with a lumpy tax bill in January 2021. And while they were able to spread the payments throughout this year, it has left many of them having to set aside enough of their income to pay for two tax years concurrently.

“Given the fact that price rises are now squeezing their budgets even harder, it has been an incredibly difficult year to be self-employed.

“By contrast, for everyone else, while in a normal year the overall tax burden growing by more than a quarter would be horrendous, this year we can’t make the same kinds of comparisons.

“The annual rises have been significantly distorted by the pandemic. The government brought in some rules to ease the tax burden, and other tax changes to stimulate the market – including the stamp duty holiday which pushed stamp duty receipts up 40 percent . Meanwhile, the pandemic itself affected the tax take, with job losses early in the pandemic pushing down PAYE income tax, and tragically the higher number of people dying during this time pushing up inheritance tax by almost a quarter (22.5 percent).”

While it remains to be seen what the Government will announce, Mr Sunak said in September that: “At the Spending Review later this year, I will set out how we will continue to invest in public services and drive growth while keeping the public finances on a sustainable path.”

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