Time to start thinking about your Tax Return

With the nights drawing in and summer now an increasingly distant memory, the deadline of 31 January 2020 to submit your 2018/19 Tax Return is getting ever nearer. However, there are many different reasons why it is important not to leave things until the last minute.

Chances are if you have a tax advisor to prepare your return, they will already have chased you for the information required to complete your 2018/19 return, if you haven’t done so already. Getting the information to your advisor early is good for workflow reasons, but it is also better for you to get the process started with time to spare for any unexpected questions, such as the need for further information or the discovery of an unexpected tax issue, rather than in the January rush with little time to spare.

The tax return dates for your diary

The main deadline to submit your 2019 Tax Return is 31 January 2020, but if this is your first year and you still need to register for Self-Assessment, the deadline was 5 October 2019. You therefore need to register as soon as possible if you have not already. The deadline to submit a paper Tax Return is 31 October 2019, although most advisors will submit online and if you are one of the small group who HMRC will not accept online Returns from, you will usually have the deadline extended to 31 January 2020.

There is also another deadline to consider of 30 December 2019, and that applies if your outstanding tax liability is less than £3,000 and you are planning on settling this through your pay as you earn (PAYE) code in the 2020/21 tax year. This option will be available if you are an employee or receive a pension, against which a PAYE code operates, and this method can prove very helpful for cash flow purposes.

If you cannot settle your tax liability through a PAYE code, then the deadline for you to pay your tax due, and any payment on account for 2019/20, is 31 January 2020. As the amount cannot be known until the Return is prepared, it is better to do this sooner rather than later in order to be able to plan for the payment to be made. This is especially important if you potentially have a large amount due.

How investment dividends could affect your liability

One reason your liability could be unexpectedly higher than in previous years is if you typically receive substantial dividends from investments. In recent years, the first £5,000 of dividends were effectively tax-free. However, from 2018/19, this dividend allowance was reduced to £2,000, resulting in higher tax liabilities for those individuals previously utilising the full allowance. As this change could, in some cases, also push people into the payment on account regime, leading to an even higher 31 January 2020 payment, it is important for affected individuals to understand their liabilities due as soon as possible.

Were the worst to happen and you miss your Tax Return filing deadline, the penalties are getting ever more severe. There is an automatic £100 penalty issued straight away, regardless of whether you have any tax due, increasing to £10 per day (up to 90 days) after 3 months, and further penalties if the delay continues and if there is overdue tax to pay. 

With an ever-complex set of deadlines and penalties for submitting your Tax Return, not to mention changes in the tax rules which may lead to unexpected increases in your tax bill, it is of growing importance to get your Tax Return prepared and submitted as soon as possible. Better that than leave it to the last minute, or even worse, miss a deadline and face unnecessary fines!

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