Sarah Bradford looks at some of the advantages of filing your 2021/22 tax return early.
The tax year 2021/22 came to an end on 5 April 2022. Anyone who needs to file a self-assessment return for a tax year can do so once that year has come to an end; it is not necessary to wait until nearer the filing deadlines. In a press release, HMRC revealed that almost 65,500 taxpayers filed their 2021/22 tax return on 6 April 2022.
There can be advantages to filing early.
Who needs to file a tax return?
You will need to file a self-assessment tax return if you have been sent a notice to file by HMRC.
If you normally file a return and did so for 2020/21, it is likely that you will have received a notice to file (on form SA316) once the tax year 2021/22 came to an end.
New source of income
If you do not usually file a self-assessment return (e.g., because all your income is taxed at source under PAYE), but you had a new source of income in 2021/22 on which you will need to pay tax, you will need to register for self-assessment. The registration process depends on why you need to register.
If you became self-employed in 2021/22 (even if you were also employed) and did not send a tax return for 2020/21, you will need to register by 5 October after the end of the tax year in which the business started. Where the business started in 2021/22, you must register for self-employment by 5 October 2022. When registering for self-assessment, you will also register for Class 2 National Insurance contributions (NICs).
If you are not self-employed but have a new source of income (e.g., rental income or taxable dividend income), or you have a capital gain to report, again you will need to register by 5 October 2022 if the new source first arose in 2021/22. Again, the process depends on whether you have previously filed online.
Detailed guidance on registering for self-assessment can be found on the Gov.uk website at www.gov.uk/register-for-self-assessment.
Once you have registered, you should receive a letter from HMRC reminding you to file your self-assessment tax return.
Filing deadline
The deadline for filing your self-assessment tax return depends on whether you file a paper return or file online, and whether you want to have any underpayments collected through PAYE via an adjustment to your tax code.
Although HMRC prefers taxpayers to file online, it is still permissible to file a paper return. However, if you choose this option, you will need to file your return earlier than if you file online. The normal deadline for filing a paper tax return for 2021/22 is 31 October 2022. However, if you were not sent a notice to file a 2021/22 tax return by 31 July 2022, a later deadline of three months from the date of the notice to file applies.
For example, if you are sent a notice to file a return dated 18 September 2022, you can file a paper return up until 18 December 2022 without incurring a late filing penalty.
The deadline for filing your 2021/22 tax return online is midnight on 31 January 2023. Again, this is extended where the notice to file was received after 31 October 2022, with a later deadline of three months from the date of the notice applying.
However, if you have a tax underpayment for 2021/22 and you would rather pay this progressively under PAYE during 2023/24, if the underpayment is not more than £3,000, you can do so if you file your return online by midnight on 30 December 2022 and elect for the underpayment to be coded out when doing so.
If you file your tax return after the relevant deadline, you will receive an automatic late filing fee of £100. Filing early removes this risk.
Why file early?
HMRC is keen to encourage taxpayers to file their tax returns early. Indeed, earlier this year it issued a press release highlighting some of the benefits of doing so. This is undoubtedly in HMRC’s interest as it will make it easier for it to manage its workload. It will also be particularly beneficial to it if taxpayers also pay any tax that they owe when they file their return, rather than waiting until nearer the payment deadline. However, there are some advantages to the taxpayer in filing early:
- It gets it out of the way and off your ‘to do’ list.
- You can file the return at a time that suits you.
- You can take your time and may feel under less pressure than if you are trying to meet the deadline.
- You will know in advance how much you owe and can budget for your tax payments.
- If you are owed a refund, you will receive it sooner.
- If you are likely to struggle to pay your tax bill, you have more time in which to set up a payment plan.
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You will not get a penalty for missing the filing deadline.
Your tax adviser will also thank you if you get your tax return information to them early, as this will reduce pressure on them around the 31 January filing deadline.
Collating information
Before you can file your tax return for 2021/22, you will need to have the necessary information available. This may dictate when you are able to file the return – you should only include provisional figures as a last resort.
For example, if you have a job which is taxed under PAYE, you will need the information to complete the employment pages. To do this, you will need your form P60 for 2021/22, which you should have received by 31 May 2022. If you also received taxable expenses and benefits, you will need your form P11D (a copy of which you should have been given by 6 July 2022) or details of payrolled benefits (which should have been notified to you by 1 June 2022). If you have not received this information, you should ask your employer for it. If you left your job in 2021/22 and did not start a new one before 5 April 2022, the information on your pay will be on your P45.
If you are self-employed, you will need to prepare your accounts before you can complete the self-assessment pages. If you received Covid-19 support in 2021/22, such as a grant under the SEISS scheme, you will need to include details of this on your return as the grant is taxable. Check that you have the necessary details to hand.
Likewise, if you have property income, you will need details of your rental income and deductible expenses to calculate your taxable rental profit. You may need statements from letting agents, as well as your own records of expenses, to do this.
If you have taxable investment income, such as interest and dividends, you will need to work out the totals for the 2021/22 tax year from statements and dividend vouchers. If you realised capital gains in the tax year, you will need the information to calculate any gain or loss. If you have made a payment on account of a residential property gain, you can finalise the liability on your tax return. This may trigger a refund if you have generated a capital loss in the year after the date on which the property was sold.
If you do make a mistake, all is not lost; you have until 12 months from the normal filing date (so 31 January 2024 for a 2021/22 online return) in which to file an amended return.
Paying the tax
Payments on account for 2021/22 must be made on 31 January 2022 and 31 July 2022, with any remaining tax paid by midnight on 31 January 2023 (unless coded out).
If you are likely to struggle to pay, set up a payment plan sooner rather than later.
Practical tip
Filing your tax return for 2021/22 ahead of the filing deadline will provide you with certainty as to what you owe and allow you to budget more accurately for your tax payments.
