Should you file a tax return? Why people need to fill one out but often don’t realise, from dividends, to pension tax relief and earning more than £100,000
- HMRC expects a record number to complete self-assessment forms this year
- But some may not be aware they need to and will inadvertently miss the deadline
- It may be the case that HMRC owes you money but it is up to you to claim it back
Nearly five million people still haven’t filed their tax returns — with just two weeks to go. HM Revenue & Customs says it expects a record number to complete self-assessment forms this year.
But some may not be aware they need to, and will inadvertently miss the January 31 deadline. The penalty is an automatic £100 fine. So who should submit a return — and who can opt out?
Money Mail explains all…
Deadline: HMRC says it expects a record number to complete self-assessment forms this year
Who needs to fill out a tax return?
The main reasons you need to file a tax return for 2021-22 include if you:
- Earned more than £100,000 during the last tax year, even if you were in full- time employment.
- Run your own business or work for yourself and earned more than £1,000 between April 6, 2021 and April 5, 2022.
- Were a ‘partner’ in a business partnership, such as an accountancy practice.
- Earned income overseas, or lived abroad and earned income in the UK.
- Earned more than £1,000 from renting out property or from running a holiday let, including Airbnb.
- Were employed but used your own money to travel and pay for other job expenses. You may be able to claim tax relief.
- Claimed Covid-19 grants or support payments, such as the Self-Employment Income Support Scheme (SEISS).
- Need to claim tax relief, such as on pension contributions made from your post-tax income.
- Earned more than £50,000 while you or your partner claimed child benefit.
- Want to claim tax relief on donations to charity (if you are a higher rate taxpayer).
- Earned more than £2,000 from shares or fund dividends.
- Earned income from a trust. Beneficiaries of someone’s estate must pay inheritance tax on any assets exceeding the allowance of £325,000.
- Want to transfer your tax-free personal allowance to your spouse.
Claim back tax relief
It may be the case that HMRC owes you money — but it is up to you to claim it back.
If you worked from home in 2021-22, you can claim tax relief on £6 per week for the entire year at your marginal rate — £312 in total. This is the last year that the allowance can be claimed.
If you donated to charity, even by supporting a friend via Just Giving or through a regular donation, make sure these are included on your tax return.
And if you are a higher rate taxpayer and make pension contributions out of your income after you’ve already paid tax, you may be able to claim further tax relief.
You can deduct a range of expenses from the tax you owe as a sole trader or self-employed worker. These include travel costs for work, office expenses, marketing charges, and staff costs such as salaries.
As an Airbnb host, you can deduct any cleaning costs.
I didn’t know I had to file…
Millions are late to file their tax return every year. Around 2.3 million people who needed to file one for 2020-21 missed the initial deadline last year.
During the pandemic HMRC was more lenient — it extended the tax return deadline by a month in 2021 and 2022.
But this year, anyone who misses the first deadline will receive a £100 fine. After three months, you will begin incurring additional daily fines of £10, up to a maximum of £900. Failing to file for a whole year could leave you facing a £1,600 bill.
Tax rebate: It may be the case that HMRC owes you money – but it is up to you to claim it back
HMRC also charges 6 per cent interest on late payments.
But what if you don’t even realise you owe any tax, or need to claim any relief back? In HMRC’s view, that’s tough — the onus is on you to declare your income.
Mike Warburton, former tax director at Grant Thornton, says: ‘As the name “self-assessment” suggests, it is up to you to assess whether you owe any further tax.
‘The revenue is getting much wiser at tracking down those who don’t pay. It looks for online for ads for lettings and freelance work, which it cross-references against what has been declared.’
Who doesn’t need to submit one?
Generally, you do not need to file a tax return if all your income is taxed under PAYE, you earned less than £100,000, you are not making any other income that could be taxable — and you are not claiming any reliefs, grants or expenses from HMRC.
If you earn less than £1,000 per year from additional income, you do not need to send off a tax return.
If you believe you no longer need to file, you should write a letter to HMRC explaining how your circumstances have changed.
It is only when you receive a response from the revenue confirming it does not expect a tax return from you that you can stop, says Mike Warburton.
If in doubt, visit gov.uk/check-if- you-need-tax-return.
Taxman to clamp down on rip-off rebate firms
The taxman will finally clamp down on rip-off rebate firms after Money Mail exposed devious tactics used by repayment agents.
Unregulated firms charge punitive fees for tax refunds that customers can claim for free. HMRC will ban assignments — iron-clad contracts which transfer the right for a repayment from the taxpayer to the agent.
We found firms were flooding social media sites with misleading questionnaires tying taxpayers into these agreements. Scores of readers said they had no idea they were entering into a contract, which in some cases allowed agents to take a chunk of future rebates.
Under tougher rules, agents will have to register with HMRC and ensure their terms are clear. Last year, we helped win back £6 million for taxpayers who lost cash at the hands of Tax Credits Ltd.