10.1.2023 | Tax

Top tips for the January tax return

Head of taxation at Beatons, Andrew Diver, offers top tips to ensure there’s no last minute tax return hiccups at the end of the month.

It’s that time of year again. The festivities are over, and it’s back to business – and for many, that will include submitting a tax return by January 31.

It can be tempting to put it off, but it doesn’t need to be a painful task. With a bit of preparation, it can be filed and forgotten about before you know it.

To help you get on top of that looming return, the Head of Taxation at Beatons, Andrew Diver, offers a few points to remember.

It pays to be on time
Your tax return must be submitted by January 31, 2023, otherwise, you will receive a £100 penalty. Then, if the tax owed isn’t paid by February 28, 2023, a surcharge of 5% of the tax due applies.

Also, the Bank of England base rate has increased, so that means the interest on late paid tax has too.

It is now charged at 5.5% p.a. compared to just 2.6% this time last year. So, being organised and on time pays.

Last chance for the work-from-home deduction
This is the last year that the work-from-home tax deduction can be claimed, so don’t forget to use it. A general £312 deduction for working from home was introduced as a covid measure in 2021/22.

HMRC allows you to claim the £312 expense deduction from your employment income if you were required to work just one day from home in the year to April 5, 2022.

Are you due tax relief on your pension?
This is an area which is frequently overlooked when filing a self-assessment return, but it can be worth thousands.

Anyone earning more than £50,270 might be eligible for extra tax relief on personal pension contributions paid through salaries via auto-enrolment or their own personal arrangements with pension providers.

If you are unsure, check with your employer whether employee contributions deducted from your salary are paid over to the pension company gross or net of tax, as this will determine if you are entitled to additional higher rate tax relief.

A further note on pensions is that care is needed if you happen to have an income of more than £210,000 as the amount which can be paid into a pension fund can reduce from the maximum of £40,000 down to as little as £4,000.

If you’re unsure, seek advice from an accountant.

Be sure about expenses
Claiming as many legitimate expenses as possible will mean you pay less tax. Keep organised evidence of all expenses, and be sure to check that you’re claiming everything you can. For maximum efficiency in this area, it can be beneficial to engage an accountant, and Beatons would be happy to advise.

Do you earn anything from overseas?
Don’t forget to include any overseas income, as HMRC will have these details shared with banks or other tax authorities, so do make sure you include them.

Omissions can be very costly, with up to 200% penalties if you are also a 40% taxpayer – resulting in a whopping 120% payment required to HMRC.

Did you give to charity?
Make the best use of charitable donations as they can result in tax relief. A payment under gift aid, if your income exceeds £50,270, can not only give the charity more money but can result in a reduction in your tax bill too.

Special rules can also allow contributions made not just in the year to April 5, 2022, but also up to January 31, 2023, to be used to reduce your tax liability. These are included in Box 8 of the SA100 form (page 4) and can give a further 25% tax relief on the amount donated.

Seek advice from your accountant if you’re unsure.

Extras to remember
Do not lose sight of those extras such as child benefit payments. These need to be repaid if your income is more than £50,000. If you don’t prepare a tax return, but your income is now more than £50,000, you should notify HMRC, and you will be required to prepare a tax return. HMRC will not automatically notify you of this.

Student loan repayments will be due if your income exceeds the threshold amounts. And while your employer might be collecting student loan repayments for you, if you’re filing a return for other income such as self-employment, rental or dividend income, additional student loan repayments might be due through the self-assessment system.

For help and advice with filing your tax return or any other accountancy needs, please contact Beatons info@beatons.co.uk or 01473 659777.