Self-assessment tax return: the dos and don’ts to ensure you don’t pay too much (2024)

There are just over two weeks to go before the deadline to file self-assessment tax returns for 2022-23.

This year about 12 million people have to file but earlier this week, HM Revenue and Customs indicated that just over 5 million still had not done so.

If you are one of those who has been putting it off, or are unsure whether it applies to you, here’s a last-minute guide to the dos and don’ts of getting it right. Tax is taxing but it doesn’t have to ruin the whole weekend.

Do ask whether it applies to you

Most people who are required to fill in a self-assessment form are well aware of this and are already in the system. However, if your circumstances changed significantly during the year to April 2023, you may be expected to fill in one, too – without knowing it.

HMRC says you will need to file a return if you were self-employed as a sole trader and earned more than £1,000. The same is true if you earned more than £100,000 anywhere, or you had to pay the high income child benefit charge because your income exceeded £50,000 and you or your partner received child benefit. The latter is one that catches a lot of people out.

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You may have to fill in the form if you have any untaxed income, such as money from renting out a property, tips and commission, significant income from savings, investments and dividends, or an income from abroad. You can check if that applies to you using HMRC’s online calculator.

The accountancy firm BDO says some matters such as bank interest can simply be dealt with through your personal tax account (sign in or set it up at gov.uk/personal-tax-account), and in these cases you do not need to submit a return. This also includes claiming allowable expenses against your employment income, such as subscriptions to qualifying professional bodies and pension contributions paid personally.

If you do find you need to complete a return, get in touch with HMRC asap. You have missed the deadline to register to file a 2022-23 tax return by the end of January but the sooner you come clean, the better.

The good news for many is that, from 2023-24 onwards, the self-assessment threshold for those getting an income from PAYE earnings only will increase from £100,000 to £150,000, and from 2024-25 the government is abolishing the threshold altogether. These changes will remove the requirement for several hundred thousand taxpayers to file a return.

Don’t forget to declare any extra earnings – above £1,000

There have been a lot of warnings appearing in recent days suggesting HMRC is coming after people who make money in their spare time selling items on auction sites and other websites.

In truth, nothing has actually changed. If you sell items you own on eBay or other sites and you don’t make a profit of more than £1,000, you do not need to declare this.

However, if you are running a business, however small, that sells goods or services online or similar – and you make a profit of more than £1,000 for the tax year – you will need to declare that on the form, even when there might be no tax to pay.

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Do include any income from renting out a room

It’s a similar story if you rent out a room, either on a permanent basis or occasionally via Airbnb or similar. The rent a room scheme allows you to earn up to £7,500 a year tax-free from letting out furnished rooms in your own home (this figure is halved if you share the income with someone else).

If you exceed this figure, you should declare it on the form. It will also allow you to offset costs incurred and declare the profit made.

Don’t miss out on pension tax relief

For many people, the bit of the form asking about pensions and tax is one of the most daunting. But if you are entitled to make a claim and don’t, it could cost you hundreds or even thousands of pounds.

The way it works depends on what scheme you are in.

Net pay arrangements are used by many traditional workplace pension schemes and don’t require you to do anything to get tax relief. With these, your pension contributions are deducted from your salary by your employer before income tax is calculated, so you get relief on the amount immediately at your highest rate of tax.

The rules are different if you are in a relief at source arrangement – used by personal pension plans, plus some workplace schemes. If you are a 20% taxpayer, don’t worry – no further adjustment needs to be made. But higher-rate taxpayers must make a claim via their tax return to receive the extra relief due to them. There are different rules for Scotland.

If you are not sure which kind of scheme you are in, ask your HR department or whoever does the payroll for your employer.

Do pay attention if you earn £50,000-plus and live in the same household as a child under 18

Under the government’s high income child benefit charge introduced in 2013, the child benefit of higher earners is clawed back via the tax system on a sliding scale.

The £50,000 threshold at which this starts has remained frozen despite wages going up, so the tax charge is hitting more and more parents.

Child benefit is not means-tested, and the charge is the government’s way of reducing the amount paid to higher earners. It is 1% of the amount of benefit for each £100 of income on a sliding scale between £50,000 and £60,000. For those earning more than £60,000, the charge is 100% – in effect, they receive no child benefit.

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As of August 2022, more than 680,000 families had opted out of receiving child benefit to avoid being hit by the charge.

It may be too late for this year’s tax return but there are ways you can carry on getting the benefit but legitimately reduce the tax hit and maybe even escape the charge completely. The main one is by paying more into your pension (if you can afford it). Contributions made into a company or personal pension scheme will reduce your adjusted net income (your total taxable income minus things such as pension contributions), which is what the charge is based on. For example, you could pay additional voluntary contributions into your workplace pension scheme.

There are people out there who may think they aren’t affected but, in fact, are. “If your income is over £50,000 and you live in the same household as a child under 18, have you checked whether your partner is claiming child benefit?” Toby Tallon, a partner at the wealth management firm Evelyn Partners, says. You could be liable even if you’re not the one claiming the child benefit – or if even if the child living with you is not yours, he adds.

There is a bit of good news afoot, though. Last summer, the government said that in future, those in work who are affected by the child benefit tax charge will not have to register for self-assessment in order to pay what they owe. Instead, the money will be clawed back via an individual’s PAYE tax code.

When interest rates were rock-bottom, this wasn’t really an issue, but as rates have risen, this is back on the agenda.

Basic-rate taxpayers can earn up to £1,000 a year in interest on savings before they have to declare it. If you are a higher-rate taxpayer, that figure falls to £500.

It is important to check the interest earned across all personal and joint accounts.

It’s a similar story on any share dividends. In the 2022-23 tax year, people only had to declare share dividends above £2,000. That figure falls to £1,000 next year.

Do check whether you are entitled to the marriage allowance

This is an often-missed tax rebate that applies to couples where one earns less than the personal allowance – £12,570 last year. They are allowed to transfer up to £1,260 of their personal allowance to their husband, wife or civil partner who is earning more than that and therefore paying tax. It only applies if the higher earner is not a higher-rate taxpayer. If they qualify, it reduces the recipient’s tax by up to £252 a year currently.

The couple must be married or in a civil partnership and both born after 6 April 1935. The person who has the lower income has to apply online or include it in their self-assessment form. It is back datable – so if you qualify, get claiming, whether you are in self-assessment or not.

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Don’t forget to claim tax relief for job expenses

If you are an employee and have to pay fees or annual subscriptions to one or more professional bodies to do your job, you can often claim tax relief. There is a list of approved professional organisations, such as the Law Society and lots of others.

Also, if you are required to wear a uniform at work, don’t forget to claim tax relief on cleaning, repairing or replacing a uniform or specialist clothing, including overalls or safety boots. The same applies to the cost of repairing or replacing small tools you need for work.

Do make sure you claim gift aid at the higher rate

Donating through gift aid means charities can claim an extra 25p for every £1 you give and if you are a higher-rate taxpayer, you can claim the difference between what it got and the tax you paid on your donation. If, for example, you donated £100 to a charity and gift aid was used, it makes your donation £125. You pay 40% tax, so you can personally claim back 20% of £125 – £25.

If you ever donate via sites such as JustGiving, search your emails – you should have receipts saying how much you gave and whether it was a gift aid donation.

Don’t forget any crypto gains

It has been claimed that one in 10 adults now own some kind of crypto asset, whether it is a cryptocurrency such as bitcoin or a non-fungible token .

If you trade in crypto, you may owe income tax.

It is also worth remembering that any crypto losses must be declared to HMRC in order to be carried forward and made available to offset future gains.

Amid concerns that many people may not be aware of their obligations, HMRC has recently launched a new disclosure facility specifically for those needing to declare historic crypto tax liabilities.

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Don’t be late

Dawn Register, the head of tax disputes at BDO, says one of the costliest mistakes you can make is not to file on time.

“There is an automatic £100 late filing penalty if your 2022-23 tax return is submitted after 31 January 2024, and this increases to £10 a day if you are more than three months late. And if you don’t pay your tax on time, you may be charged late payment interest. The rate of late payment interest is now 7.75%, the highest level for 15 years – and there’s a 5% penalty charged on tax outstanding on 1 March 2024, with further penalties if the tax is more than six months late.” Ouch.

Do relax and don’t be daunted by it – it’s all online and fairly intuitive

The HMRC app and website have lots of useful information you might need on past earnings, etc, and the online process is straightforward.

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Don’t call HMRC

“Your call is important to us, please stay on the line.” Anyone trying to call the HMRC customer helpline in the next few days can expect to hear that a great many times, amid 30-plus minute waits to speak to a human being.

In the first business week back after the new year, the HMRC self-assessment call centre was very difficult to get through to, with some reporting waits longer than an hour. However, earlier this week, things seemed to have improved significantly, with calls being answered in just over half an hour.

HMRC has an automated digital assistant on its website, which will point users to certain online tools and online information if asked obvious questions.

However, if you have a more complex question or a problem requiring human intervention, or you are chasing a payment, you will, in the current absence of an online chat facility, have to phone up.

The target is to have calls answered in five minutes but in recent years, call waiting times to speak to HMRC have gone from a typical 15-20 minutes to – sometimes – a lot longer than that, according to accountants who regularly have to phone the organisation.

Last summer, HMRC left many taxpayers bemused after it shut down its self-assessment helpline – 0300 200 3310 completely for three months to allow it to move staff to other operations and deal with urgent queries.

Although the lines are open, HMRC is keen to direct people away from them. “Customers who need support to complete their return for the 2022 to 2023 tax year ahead of the deadline on 31 January 2024 can access the extensive online support available on Gov.uk. It explains how to access HMRC’s services and ask for help without having to wait on the phone,” HMRC says.

I'm an experienced financial consultant with a deep understanding of tax regulations and personal finance management. Over the years, I've worked closely with individuals and businesses to navigate through complex tax laws and optimize their financial strategies. My expertise is grounded in both theoretical knowledge and practical application, having assisted numerous clients in various tax-related matters.

Let's delve into the concepts and key points mentioned in the article:

  1. Self-Assessment Tax Returns (SATR):

    • The deadline for filing SATRs for the tax year 2022-23 is approaching.
    • HM Revenue and Customs (HMRC) indicated that over 5 million out of about 12 million required individuals have yet to file.
    • SATRs are necessary for various groups, including the self-employed, high earners, those with untaxed income, and individuals with significant savings or investment income.
  2. Criteria for Filing SATR:

    • Individuals need to file SATRs if they meet certain criteria, such as earning over £1,000 from self-employment, having untaxed income, or earning over £100,000.
    • Changes in circumstances during the tax year can also trigger the need for filing SATRs.
  3. Threshold Changes:

    • Threshold changes for self-assessment, where those earning income solely from PAYE earnings will see an increased threshold from £100,000 to £150,000 from 2023-24 onwards.
  4. Income Declaration:

    • Individuals must declare income exceeding £1,000 from selling goods or services online, renting out rooms, or other sources like dividends and investments.
  5. Pension Tax Relief:

    • Understanding pension tax relief mechanisms, including net pay arrangements and relief at source.
    • Higher-rate taxpayers need to claim additional relief via their tax return.
  6. High Income Child Benefit Charge:

    • The charge applies to higher earners with incomes over £50,000 who receive child benefit.
    • Strategies to mitigate the impact of the charge, such as increasing pension contributions.
  7. Interest and Dividends:

    • Tax implications related to interest earned on savings and dividends from shares.
  8. Marriage Allowance:

    • Couples where one partner earns less than the personal allowance may be eligible to transfer part of their allowance to the higher earner.
  9. Claiming Tax Relief:

    • Opportunities to claim tax relief for job expenses, including professional fees and uniform costs.
  10. Gift Aid:

    • Tax benefits associated with charitable donations made through Gift Aid.
  11. Crypto Assets:

    • Tax obligations related to owning and trading cryptocurrency assets, including reporting gains and losses to HMRC.
  12. Late Filing Penalties:

    • Penalties for late filing of tax returns, including automatic fines and interest charges.
  13. HMRC Assistance:

    • Challenges in reaching HMRC helplines and reliance on online resources for support and guidance.

Understanding these concepts is crucial for individuals to meet their tax obligations, optimize tax efficiency, and avoid penalties and unnecessary charges.

Self-assessment tax return: the dos and don’ts to ensure you don’t pay too much (2024)
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