Millions yet to file self-assessment tax return as deadline nears

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With just over four weeks to go until the 31 January self-assessment deadline, several million people still haven’t filed their tax return. This could be the weekend to get it out of the way.

Meanwhile, if you are one of the millions who were told by their employer not to come into the office, don’t forget that you can claim tax relief worth up to £125 a year for working from home.

Each year about 11 million people have to complete a self-assessment tax return. Looking at recent years, there were still 5.4 million taxpayers who hadn’t filed by 31 December 2019, and 5.5 million who were yet to file by 31 December 2018.

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For most people, the coronavirus is no excuse for not doing it, though HM Revenue & Customs has said it is “determined to help customers during this difficult time”.

HMRC says it is aware that many people will have been adversely affected by the pandemic, and may, for example, need help to spread the cost of their tax bill. Once an individual has done their 2019-20 return, and knows their tax calculation, they can set up a payment plan, provided they owe less than £30,000. They can then choose how much to pay straight away and how much to pay each month by direct debit, and it can all be done online. Needless to say, you’ll have to pay interest.

It’s a good time to remind the many people who have spent much of the past few months sitting at their kitchen table, or in their spare room, to apply for tax relief for working from home.

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Because the first lockdown began on 23 March 2020, the pandemic takes in two tax years: 2019-20 (the last two weeks) and 2020-21.

It is arguably a lot easier to claim the relief if you don’t fill in a tax return. That’s because HMRC has created an online portal offering employees a simple way to claim.

The relief is offered to workers provided that they were told by their employer, rather than chose, to work from home – and provided that they have not received home expenses payments directly from their company.

If you go for the easy, no-receipts-required route, your claim will be based on the assumption that you have incurred costs of £6 a week, and you will get back the tax you would have paid on that. For basic-rate taxpayers, it is worth £1.20 a week. Higher-rate taxpayers can claim £2.40 a week. Over the course of a year, this could reduce the bill by £62.40, or £124.80 for higher-rate taxpayers.

Note that the £6-a-week figure relates to the period from 6 April 2020; for previous tax years it is £4 a week.

As Sarah Coles at the investment firm Hargreaves Lansdown explains, to claim for perhaps a couple of weeks of the 2019-20 tax year, and the whole of 2020-21, you just put the details of when you started working from home into the online portal, and the HMRC will apply the relief.

If you do a self-assessment form, you can’t use the online portal – you must claim this as an expense on your tax return (working from home should be included in the “other expenses and capital allowances” box). And, crucially, you will only be able to claim for up to and including 5 April 2020 on the 2019-20 return. You will have to wait for 2020-21 form to claim for working from home after that date.

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So who needs to do a tax return? Broadly, it’s if any of these apply:
you are a self-employed sole trader whose annual turnover is more than £1,000;
you earned more than £2,500 renting out property;
you, or your partner, received child benefit and either of you had an annual income of more than £50,000;
you received more than £2,500 in other untaxed income, for example from tips or commission, or are an employee claiming expenses totalling more than £2,500;
you earn more than £100,000 a year; or you earned income from abroad that you need to pay tax on.