Tax returns: The most important things you need to remember

end of year working out inland revenue tax self assessment form with calculator
Half of those who need to file a self assessment tax return by 31 January still haven't done it. Photo: Getty

A record 3,275 people filed their tax return on Christmas Day 2022, taking the total who submitted their return over the Christmas break to 22,000 – including me.

Yet even after all of that, by 3 January, almost half of those who needed to sort their tax returns by the 31 January deadline still hadn’t done it – with 5.7 million of them outstanding.

For the last couple of years, HMRC has waived penalties for anyone filing and paying before 28 February. They still had to pay interest on outstanding tax, but the taxman concluded that it had been a horrible few years for self-employed people, so they could be forgiven for taking a bit longer to get their paperwork in order. Sadly, this year, there’s no sign they’ll offer anything of that sort.

So if your tax return is still hanging over you, it’s worth getting cracking now.

Before you do anything else, if you haven’t registered for self-assessment yet, do it now, because you’ll need to register in order to get a Unique Taxpayer Reference Number (UTR) – which you’ll need before you can file. This will be posted to you, and could take 10 days to arrive.

Read more: Top tips for filling in your tax return

Once you have a UTR, register immediately for the Government Gateway – which is the system that lets you file online. If you’ve not registered for the Gateway yet, it will take up to 10 days for your activation code to get to you by post, so you can’t afford to hang around.

If you’ve already had these things, but lost them, you need to act fast. If you’ve lost your UTR, you can call the self-assessment helpline and ask them to post it to you – which will take up to 10 days. If you’ve had your activation code but lost it, or didn’t use it within 28 days, you’ll need to sign into HMRC online services and ask for another one. Again it could take up to 10 days to reach you.

When you get into the system, if you’re running short of time, you might be able to take advantage of some official corner-cutting on the return itself.

If you work from home or use your own car for work, and don’t have time to calculate your actual usage, instead of working out your expenses, you can use flat rates for both. However, you can’t cut corners for any other kind of expenses. You need all your receipts and invoices, and should check the website to make sure you know what you can claim for.

You should also take your time with the pensions section on the self-assessment form, which is where a lot of people come unstuck. Higher rate taxpayers need to check if they have to claim for additional higher rate relief on their pensions. They also need to make sure they enter the gross value of contributions. This isn’t just a total of all the money paid in: it’s everything they paid in, plus tax relief at 20% on top.

Read more: How to plan your finances for 2023

Don’t forget your COVID support either. Self-employed people may have had a payment from the Self-Employment Income Support Scheme in 2021/22, while those who are employed may have received furlough payments from the Coronavirus Job Retention Scheme. If you received this, or any other COVID support, you’ll need to declare it.

And finally, don’t forget to pay. It sounds ridiculous, but you’d be surprised how many people are so focused on doing the paperwork, that they completely forget they actually have to hand over the cash. You may need to leave some extra time for payments too. It can clear on the same day if you pay by debit card, but will sometimes take a day to go through. If you pay by BACS or direct debit, it can take up to three days.

Unfortunately, one reason people tend to put off their tax return is because things haven’t gone to plan that year. They may have ended up spending some or all of the cash they should have put aside for their tax bills, so they can’t cover the cost. If you’re in this position, you need to do the paperwork anyway, because if you put it off, you’ll only end up storing up more problems.

Read more: Prepare yourself for the financial challenges of 2023

Once you’ve filed your tax return, then as long as you owe less than £30,000, are within 60 days of the payment deadline, plan to pay your debt off within 12 months, and don’t have any other payment plans with HMRC, then you can set up a time-to-pay arrangement that will divide your bill into monthly instalments.

You’ll have to pay interest on your debts, and at the moment that’s at 6%, but it’s a relatively cheap way to borrow, and is much cheaper than the fines and penalties you’ll rack up if you can’t bring yourself to face it in time.

Once you’ve submitted your tax return, in an ideal world you’ll commit to doing it earlier next year, giving yourself more time for unexpected admin problems, more opportunity to check you’ve not made a mistake, and less chance you’ll let your tax return ruin Christmas.

Watch: How to prevent getting into debt