Should YOU be submitting a tax return? Thousands hit by stealth expenses

With simply seven days to go, almost 4 million individuals have but to file their tax returns.

HM Revenue & Customs estimates greater than 12.1 million individuals must file a self-assessment tax return for the 2022-2023 tax yr by January 31, but simply 8.3 million have executed so up to now.

More taxpayers might want to submit a return for the primary time this yr because of freezes on tax thresholds and tax allowances.

If you might be one of many 3.8 million don’t panic — there’s nonetheless time to get your tax affairs so as so long as you act now. Miss the deadline and also you face an computerized £100 advantageous.

So who ought to submit a tax return? What when you didn’t realise you must file one? And what pitfalls do you have to look out for?

Money Mail asks the specialists…

Do I must file a tax return?

There are many various causes you could must file a tax return for the 2022-23 tax yr, together with when you:

• Earned greater than £100,000 between April 6, 2022, and April 2, 2023, even when you have been in full-time employment. This will not be the case from April 2024, when the edge will rise to earnings of £150,000 a yr.
• Run your personal enterprise or work for your self and earned greater than £1,000 throughout the 2022-23 tax yr.
• Were a associate in a enterprise partnership, equivalent to an accountancy observe.
• Earned revenue abroad, or lived overseas and earned revenue within the UK.
• Earned greater than £1,000 from renting out property or from operating a vacation let, together with by means of Airbnb.
• Were employed however used your personal cash to journey and pay for different job bills. You might be able to declare tax aid.
• Need to say tax aid, equivalent to on pension contributions comprised of your post-tax revenue.
• Earned greater than £50,000 when you or your associate claimed little one profit.
• Want to say tax aid on donations to charity (in case you are a higher-rate taxpayer).
• Earned greater than £2,000 from shares or fund dividends. Beware whenever you file subsequent yr’s tax return — this allowance has halved to £1,000 as of April 2023.
• Earned revenue from a belief. Beneficiaries of somebody’s property should pay inheritance tax on any property exceeding the allowance of £325,000.
• Want to switch your tax-free private allowance to your partner.

If you’re nonetheless not sure about whether or not you’ll want to file a tax return, go to: gov.uk/check-if-you- need-tax-return

What if I didn’t realise I needed to file one?

If you didn’t realise you owed any tax, or wanted to say any aid again, then that’s irrelevant so far as HMRC is anxious — the duty is on you to declare your revenue.

And many who don’t realise they should file a tax return are more likely to get caught out this yr, warns Dawn Register, a tax specialist at accountancy agency BDO. 

Frozen thresholds for allowances on revenue, financial savings curiosity, dividend revenue and little one advantages will drag 1000’s into paying greater taxes — and lots of could need to file a tax return for the primary time because of this.

Ms Register says: ‘Common sense doesn’t essentially apply, so be sure to double examine to see in case you are eligible. There are plenty of counter-intuitive facets of the UK tax system.’

For instance, working mother and father with a excessive revenue should file a tax return with the intention to return the kid profit they’ve acquired. 

Parents who earn as much as £50,000 are entitled to the total good thing about greater than £2,000 a yr for 2 kids. But after £50,000, the profit tapers out and other people lose it solely after they earn greater than £60,000.

The guardian on the upper revenue is chargeable for paying the tax cost and should achieve this through self-assessment or will face a advantageous.

Another widespread pitfall is failing to file a tax return after promoting a second property when capital positive factors tax is due, Ms Register says.

Similarly, anybody promoting secondhand garments on Vinted or eliminating outdated digital camera and movie tools on eBay will probably be below higher scrutiny from the taxman. Those who earn greater than £1,000 a yr from this exercise should pay tax on their revenue.

From January 1, HM Revenue & Customs has required digital platforms to gather info on how a lot customers make. 

This means you should be clear and should must file a tax return in future or face a penalty. Firms will probably be requested to share knowledge about sellers who make greater than 30 transactions or €2,000 (£1,735) a yr.

You can earn as much as £1,000 in extra revenue every tax yr from hobbies or facet hustles that you just take up outdoors of labor. 

Above this, you need to register as self-employed and file a self-assessment tax return on the finish of the monetary yr.

However, HMRC says individuals promoting possessions they not need are unlikely to owe tax if it’s a one-off and you aren’t making a revenue — and bought it for lower than £6,000.

From subsequent yr, HMRC will probably be proactively utilizing the information from platforms to trace down these they believe needs to be paying tax. 

However, there was no change to the foundations themselves, so you must declare your earnings and pay tax by subsequent Wednesday when you have been turning a revenue of greater than £1,000 by promoting items on-line.

Similarly, the tax you pay in your financial savings curiosity is one other space of rising significance this yr. Savers should be sure that the curiosity they earn is appropriately declared and accounted for. 

This is as a result of the curiosity you earn is taxable at your marginal price above a sure threshold.

Basic and higher-rate taxpayers can earn £1,000 or £500 of curiosity tax-free, respectively. Additional price taxpayers pay tax on all their curiosity.

If you full a self evaluation tax return, you must report any curiosity earned on financial savings there. 

Savers who’re registered for PAYE robotically pay financial savings tax by means of an adjustment to their tax code. This consists of savers who’ve an employer or who obtain the state pension.

Savings suppliers all inform HMRC of curiosity you may have earned. However, when you have earned £10,000 or extra earlier than tax from financial savings, investments, shares or dividends, you need to file a tax return.

What if I miss the deadline?

Anyone who misses the January 31 deadline will obtain a £100 advantageous robotically. After three months, you’ll start incurring extra day by day fines of £10, as much as a most of £900. Failing to file for a complete yr might depart you dealing with a £1,600 invoice.

HMRC additionally expenses 7.75 per cent curiosity on late funds. This price is set by base price plus 2.5 share factors.

For instance, when you filed and paid your taxes six months and someday late final yr and owed £5,000 in taxes, you’d have been hit with a late submitting penalty of £1,300, a 5 per cent late fee penalty price £250 and late fee curiosity price £165.48. 

This means your whole tax invoice can have surged by £1,715. The invoice will probably be bigger when you file late this yr, nevertheless, because the rate of interest has elevated.

Last yr, taxpayers have been charged £80 million in curiosity on late self-assessment funds —up from £63 million in 2020-21, in response to evaluation of official figures by accountacy group UHY Hacker Young.

Neela Chauhan, tax associate on the group says: ‘It’s extra essential than ever to file your self-assessment tax return and pay your invoice on time — otherwise you’ll face the very best late fee rates of interest since 2007.’

The late fee curiosity cost has soared according to rising rates of interest, leaping from 2.75 per cent two years in the past.

You can right a tax return inside 12 months of the self evaluation deadline when you have made a mistake, by making a change on-line or sending one other paper return. You should wait three days after submitting earlier than updating your return.

You sometimes don’t must file a tax return if all of your revenue is taxed below PAYE, you earned lower than £100,000, you aren’t making every other revenue that may very well be taxable — and you aren’t claiming any reliefs, grants or bills from HMRC.

If you earn lower than £1,000 per yr from extra revenue, you don’t want to ship off a tax return.

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