As the new year approaches, it’s essential that we stay on top of our financial responsibilities, particularly when it comes to Self-Assessment tax returns, pension and making the best use of the allowance available to us all.
Here’s a short blog on what you might need to know about the Self-Assessment deadline and how to prepare for it, including what else you might want to consider as the New Year sets in.
Key Deadlines to Remember
- Registering for Self-Assessment: If you need to complete a Self-Assessment tax return and haven’t registered before, you must do so by 5 October following the end of the tax year. This is crucial to ensure you receive your Unique Taxpayer Reference (UTR) number in time.
- Submitting Your Tax Return:
- Paper Returns: If you prefer to submit a paper tax return, the deadline is 31 October following the end of the tax year.
- Online Returns: For those filing online, the deadline is 31 January following the end of the tax year.
- Paying Your Tax Bill: The deadline for paying any tax you owe is also 31 January. If you make advance payments towards your bill (known as ‘payments on account’), there is usually a second payment deadline on 31 July.
Why Meeting the Deadline Matters
Failure to meet these deadlines can result in penalties and interest charges:
- Late Filing Penalties: An initial £100 penalty if your tax return is up to three months late. Additional daily penalties of £10 per day can apply after three months, up to a maximum of £900.
- Late Payment Penalties: If you miss the payment deadline, you could face a 5% penalty on the tax due, plus additional penalties if the delay continues.
Tips for a Smooth Self-Assessment Process
- Gather Your Documents Early: Collect all necessary documents, such as P60s, P45s, bank statements, and records of any additional income or expenses. This will make the process smoother and help you avoid last-minute stress.
- Use HMRC’s Online Services: Filing online is not only quicker but also allows you to receive immediate confirmation of submission. HMRC’s online services are user-friendly and provide step-by-step guidance.
- Seek Professional Help if Needed: If your tax situation is complex, consider seeking advice from a tax professional. They can help ensure your return is accurate and that you’re taking advantage of any available tax reliefs.
- Set Reminders: Use calendar reminders or apps to keep track of important dates. This can help you stay organised and ensure you don’t miss any deadlines.
- Check for Errors: Before submitting your return, double-check all the information for accuracy. Mistakes can lead to delays and potential penalties.
For employees who are part of a group personal pension scheme
It’s essential to ensure that you get the appropriate tax relief on your contributions. Here are some practical tips:
- Understand Tax Relief: Contributions to your group personal pension scheme are eligible for tax relief. This means that for every £80 you contribute, HMRC adds £20, making it £100 in your pension pot. Higher and additional rate taxpayers can claim further tax relief through their Self-Assessment tax return.
- Salary Exchange: If your employer offers a salary exchange (or salary sacrifice) scheme, consider opting in. This arrangement allows you to exchange part of your salary for pension contributions, reducing your taxable income and potentially lowering your National Insurance contributions.
- Keep Records: Maintain accurate records of all your pension contributions. This will help you when completing your Self-Assessment tax return and ensure you claim the correct amount of tax relief.
- Claim Additional Relief: If you are a higher or additional rate taxpayer, remember to claim the extra tax relief through your Self-Assessment tax return. This can significantly boost your pension savings.
- Consult Your Employer: Speak to your employer or pension provider to understand how your contributions are managed and what steps you need to take to maximise your tax relief.
Tax Tips for the 2024-2025 Tax Year
- Maximise ISA Contributions: Ensure you’ve fully utilised your annual ISA allowance of £20,000. This can be split across different types of ISAs, including Cash ISAs and Stocks and Shares ISAs. Utilising your full ISA allowance can provide tax-free growth and income.
- Review Pension Contributions: Make the most of the tax relief available by contributing up to 100% of your annual earnings or £60,000, whichever is lower. Contributing to your pension can also reduce your overall taxable income.
- Utilise Capital Gains Tax (CGT) Allowance: Consider utilising your annual CGT allowance. For the 2024-2025 tax year, this stands at £3,000. This can help you manage your investments more tax-efficiently.
- Plan Charitable Donations: Donations to registered charities can be tax efficient. Gift Aid allows charities to claim an extra 25p for every £1 you donate, and higher rate taxpayers can claim additional relief through their Self-Assessment.
- Check for Tax Code Accuracy: Ensure your tax code is correct to avoid overpaying or underpaying tax. This is particularly important if you have multiple sources of income or have changed jobs recently.
Conclusion
Meeting the Self-Assessment deadline is crucial for avoiding penalties and ensuring your financial affairs are in order. By staying organised, using available resources, and seeking help when needed, you can navigate the Self-Assessment process with confidence. Remember, the key dates are 31 October for paper returns and 31 January for online returns and payments. Mark these dates in your calendar and start preparing early to ensure a stress-free tax season.
Get to know your pension plan. A good way to start is by taking a step back and thinking about how much is paid in, by both you and your employer. Not least you need to make sure that you are maximising the tax relief available to you and ensuring that your records are in good order.
Define your plan. Be clear on your savings goal. For example, is it retirement focussed, are you saving for a new house, or could it be for your children’s education. A plan will help put your savings into context and you can then decide on which investment(s) could work best. If this can be achieved in the most tax efficiency way, then even better.
Beyond this, think about what other opportunities exist. Should you / can you investment more? Is pension the answer? If not, what about ISA? Beyond this, what other opportunities exist to exploit the tax allowances that exist. If you can’t save more right now, you should at least review the accuracy of your tax code to make sure that you are paying the right amount of tax.
Broadstone are not tax advisors, but we do have colleagues who are authorised and regulated to provide financial advice. Get in touch if you want to know more.
