Self Assessment tax return forms explained
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HMRC, or HM Revenue and Customs as it is formally known, helps millions of people with their tax affairs each year. This includes Self Assessment, the deadline for which usually falls on January 31, and has many scrambling to meet the date set by the Government. However, by taking action early, Britons may be able to relieve themselves of stress and worry later down the line.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, commented on the matter.
She said: “Usually about a million people miss the tax return deadline: in January 2021, it was almost twice this number.
“So unsurprisingly the taxman is keen to nip this trend in the bud, and get us all to file our tax returns extra-early this year.
“While nobody enjoys doing the taxman’s bidding, there are some excellent reasons to get cracking as soon as you can – which for employed people means June 1.”
Concerning the recently passed January deadline, Ms Coles highlighted, many individuals did not have the paperwork nor the financial means in place to meet the bill on time.
This is unsurprising, however, due to the impacts of the pandemic on many individuals and their stability.
To avoid a similarly chaotic situation occurring this year and beyond HMRC has put new processes in place, namely a new guide.
It has also said many people are already taking the action to file their tax returns.
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This, Ms Coles said, could be particularly advantageous.
She continued: “It’s fairly standard behavioural finance practice that if you want to get people to do something, you tell them everyone else is already doing it.
“But it’s not just the taxman who is set to benefit from a wave of timely returns.
“If you can get your return completed early, not only will it give you time to plan for paying your bill, it could also leave you better off.”
Self-employed people have been able to complete a Self-Assessment tax return since April 6.
This commenced the new tax year, but some have had to wait longer.
Employed people are reliant on receiving their P60, which usually arrives at the end of May.
This document shows the salary and the benefits a person has received in the previous tax year.
In deciding to file a Self Assessment tax return early, Hargreaves Lansdown has shared some of the key benefits Britons can secure.
Firstly, taking action early can mean individuals have time to plan for their bill financially, as well as undertaking some tax planning before filing.
While most of what a person does now only affects their tax bill for the current tax year, there could be some opportunities to “carry back”, and in so doing, cut a tax bill for the year one is filing for.
For example, when gifting money to charity using gift aid, the charity will reclaim basic rate tax.
However, higher and additional rate taxpayers must claim the difference through their tax return, and this claim can be carried back.
Ms Coles added: “It means you can make a donation now, and include it in the tax return you’re filing.
“This is particularly useful if your income is going to fall below a tax threshold this year, because you can claim gift aid in a year when you were paying a higher rate of tax.”
The earlier a person files their tax return, usually the earlier they could get a tax refund.
If HMRC owes a person money, then their refund should be processed straight away, and this can be aided by the fact a person is carrying out this task at a time of the year which is not traditionally busy.
Finally, by filing early a person will have longer to correct any mistakes they have made on previous tax returns.
However, if this is left to the last minute, there may not be any time to make changes which could be costly.
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