As the January 31st deadline approaches, UK taxpayers are reminded to file their self-assessment tax returns and settle any owed taxes to avoid hefty interest charges. The annual interest rate set by HM Revenue and Customs (HMRC) is currently at 7.25%, making it crucial for individuals to ensure timely payments. This year's tax filing involves several considerations, including foreign income disclosure, charitable donation reliefs, and the implications of the high income child benefit charge.
Taxpayers can conveniently file their returns online via HMRC's dedicated filing system. However, it's essential to complete the process thoroughly to receive a submission reference, as highlighted by tax experts. For individuals experiencing financial difficulties, HMRC offers the option to agree on a payment plan for debts up to £30,000. Moreover, there are opportunities to claim tax relief on charitable donations, potentially reclaiming significant amounts based on one's tax bracket.
One of the critical aspects of this year’s tax return process is the inclusion of all foreign income and clarification of residency status with HMRC. This is vital for expatriates, non-resident landlords, and UK returnees to manage their UK tax liabilities effectively. Additionally, taxpayers must declare gains from crypto assets as these are treated similarly to traditional investments under Capital Gains Tax (CGT) rules.
“For those where the tax is not automatically deducted or they earn extra untaxed income, filing a tax return is mandatory.” – Alice Haine
The importance of declaring foreign income cannot be overstated. Alice Haine advises taxpayers to ensure all overseas earnings are included in their returns and to clarify their residency status to avoid discrepancies with HMRC.
“It’s really important to remember to include all foreign income in your return and clarify your residency status to HMRC. This way, you can keep on top of what UK tax you owe, as well as any overseas liabilities.” – Alice Haine
Completing a tax return requires precision and attention to detail. Helen Thornley warns that many individuals mistakenly believe they have finished their tax returns without completing the crucial final steps of submission.
“Every year, some people get to the end of their tax return and think they have completed it when they haven’t. As part of the final submission process, it is necessary to enter your login credentials again – so make sure you keep going through HMRC’s online filing system until you are presented with your submission reference, and the completion box at the top of the screen says 100%.” – Helen Thornley
This year could see more individuals needing to file returns due to frozen personal tax thresholds until 2028. Charlene Young notes that those earning above £150,000 are required to submit a return, which may include those paid through PAYE whose incomes have increased.
“With most personal tax thresholds frozen until 2028, more people that are paid through PAYE may find themselves forced to file a tax return this year because their total taxable income may have jumped above £150,000 – a salary threshold at which all earners must submit a tax return.” – Charlene Young
Young also points out other scenarios necessitating a tax return submission, such as self-employment income exceeding £1,000 or untaxed earnings from various sources like tips, commissions, savings, investments, dividends, rental income, or foreign income.
“Other reasons to submit a return include being self-employed and earning more than £1,000, or if you have any other untaxed income from tips and commission, savings, investments and dividends, as well as rental or foreign income.” – Charlene Young
Starting early can alleviate pressure and allow ample time for taxpayers to gather necessary documentation and seek guidance from Gov.uk for an accurate submission. Jashoda Pindoria emphasizes the benefits of early preparation.
“Starting now means they take the pressure off themselves and can gather all their information, and access any help and guidance they need on Gov.uk to ensure their tax return is accurate and submitted on time.” – Jashoda Pindoria
Caroline Miskin suggests using HMRC's app for quick access to necessary details such as self-assessment tax reference numbers and employment income information.
“Use HMRC’s app to get the information you need to complete your tax return, from your self-assessment tax reference number to details of your employment income,” – Caroline Miskin
Miskin further highlights that the app can save time compared to traditional methods like searching through paperwork or contacting HMRC by phone.
“It’s likely to be much quicker than searching through paperwork or phoning HMRC, and it has lots of other useful features, too, including guidance on tax deadlines.” – Caroline Miskin
Emma Sterland advises taxpayers whose savings breached personal allowances due to rising interest rates in 2022 and 2023 to declare such income via self-assessment.
“In the era of rock-bottom interest rates, it was only savers with very large deposits who were in danger of breaching the personal savings allowances of £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.” – Emma Sterland
“As savings rates climbed through 2022 and 2023, more people will now be in the position where they have to declare income from savings via self-assessment.” – Emma Sterland
Tim Stovold explains how taxpayers can reclaim significant amounts on charitable donations based on their tax bracket.
“For every £100 donation, a 40% taxpayer can reclaim £25, and a 45% taxpayer can reclaim £31.25,” – Tim Stovold
Elsa Littlewood reminds taxpayers of the critical importance of settling owed taxes by January 31st to avoid accruing daily interest from February 1st onward.
“Make sure you’ve paid what you owe by midnight on 31 January. If you don’t, you’ll start to accrue daily interest from 1 February. The annual interest rate charged by HMRC is a whopping 7.25%.” – Elsa Littlewood