Self Assessment deadline: no late fee if you file before 28 February
First published: 3 December 2020
File before 28 February to avoid a penalty
Recognising the pressure many people are facing this year, HMRC has given sole traders some breathing space. If you can’t file your Self Assessment tax return before 31 January 2021, HMRC won’t charge you a penalty for late filing if you submit your return online by 28 February 2021.
Read announcement from HMRC
If you can’t pay your January tax bill (due by 31 January), you can apply to HMRC to spread the payments over up to 12 months – but with interest to pay.
Last year, nearly 1 million people missed the deadline for filing their Self Assessment tax return. With not long to go before this year’s deadline, don’t let this happen to you.
In this post, we look at why people leave it until the last minute and list what you need to do to get started.
This post is for sole traders using the ‘cash basis’ accounting method.
As with all things to do with tax, if there’s anything you’re not sure about, get in touch with an accountant or tax specialist.
Why leave it late?
For sole traders, the last tax year ends on 5 April. You can file your Self Assessment tax return anytime from 6 April until 31 January the following year. So why do many people leave it so late to file their return?
Last January, 11.1 million filed Self Assessment returns on time, with the majority (10.4 million) filing online (source: HMRC)
Some of those left it rather last minute: 26,562 submitted their returns between 11pm and 11:59pm 31 January 2020. And 958,296 missed the deadline completely.
Everyone knows the deadline. So why did this happen? We suspect some taxpayers mistakenly think that doing their tax return is complicated so they put it off. Until when? Until their fairy godmother stops by at Christmas and magically does it for them, of course.
(Editor’s note: I used to work with someone who missed the deadline every year and decided to view her late payment penalty fees as “a donation to our country”. We’re assuming you want to comply with your tax obligations and not make extra payments to HMRC…)
Filing is easier than you think
HMRC have been continually improving the Self Assessment portal so it’s easier than ever to use.
If you’re new to Self Assessment, you’ll need to register.
Many sole traders have straightforward accounts which are easy to file by Self Assessment. If your situation is more complicated, you might need to appoint an accountant.
Let’s get started…
- 1. Read the form
- 2. Add up your income
- 3. Add up your expense payments
- 4. Work out if you can claim any other expenses
- 5. Finish filling in the form
1. Read the form
Remember that trick for doing exams at school? Before you start, read through the whole paper. This same trick makes doing your Self Assessment return much easier. And unlike an exam, you don’t have to fill in your tax return all in one go.
- Log into HMRC
You’ll need your Government Gateway user ID and password.
- Select ‘Complete and submit tax year 2019 to 2020 Self Assessment return’
- Answer the initial questions
The HMRC portal will then tailor the form for you. For example, if you answer that you have no income from savings, then the form won’t bother asking you this question.
- Click through the pages to see what you need to fill in
- Log out anytime
Your tailored form will be ready next time you log in.
2. Add up your income
You’ll need to enter all your income, separated out into your self-employment(s) and any jobs where you’re paid as an employee.
- For self-employment
Add up all work payments you received from 6 April 2019 to 5 April 2020 inclusive.
💡 Tip: Make this easier by having all your income going into a business account that’s separate from your personal account. Haven’t got one? What are you waiting for? Open a business bank account with Tide.
- For employment
Got your P45 or P60? Maybe it’s neatly filed in your finances folder. Maybe it’s buried in your inbox. If you can’t find your P45 (if you’ve left the job) or P60 (if you’re still in the job), fire off an email to the employer right now.
The P45 or P60 lists your total income, the tax you paid and the employer’s PAYE reference number – you’ll need to fill these in on the Self Assessment form.
💡 Tip: If you have income from both employment and self-employment coming into your Tide account, create separate categories for these. For example, you could create categories called: ‘PAYE income’ and ‘ST income’
3. Add up your expense payments
💡 Tip: Spent less than £1,000 on expenses? Or haven’t got time to go through a heap of receipts? Skip to Trading allowance 👇
What you’re after here is the total amount you’ve spent ‘exclusively’ for the purposes of your self-employment. This is important because you only pay tax on your ‘taxable income’ (and only if that’s over your tax-free allowance of up to £12,500):
(taxable income) = (total self-employment income) minus (total allowable self-employment expenses)
The Government website lists what you can claim as a business expense:
Gov.uk | Expenses if you’re self-employed
If you’re not sure – and things do get complicated when you’re making expensive purchases like equipment or a car- ask an accountant.
- If you’re using Tide’s Receipt Importer or a similar digital tool
Nice one! Total up your payments that are allowable business expenses.
💡 Tip: If your turnover is less than £85,000 for the 2019/20 tax year, you don’t have to fill in your expenses by category – you can enter them on the form as one grand total.
- If you’re doing it the old-fashioned way
Schedule an afternoon of finance admin and get stuck into that pile of receipts. And make sure you keep them for several years in case HMRC asks to see them.
💡 Tip: For a run-down of what you can and can’t claim as expenses, watch our Masterclass:
Tide Masterclass | How to save time on employee and company expenses
💡 Tip: Want to see your spending in a spreadsheet? With Tide, you can export your transactions as a CSV file. In the Tide app, the export button is at the top right of the accounts page.
4. Work out if you can claim any other expenses
Some of the things you can claim as expenses won’t appear in your list of payments:
You can claim mileage for work trips. You’ll need to have kept a mileage log.
If you claim mileage, you can’t claim for fuel.
- Your mobile or other things with both business and personal use
For example, your mobile phone. You can claim a proportion of the cost as a business expense. You must calculate it in a reasonable way. HMRC give an example here:
Gov.uk | If you use something for both business and personal reasons
- Working from home
You’re using electricity, water, broadband and maybe paying rent – so you can claim a proportion of these costs as expenses, in line with how much you work from home.
You can either work this out using a ‘reasonable method’ (remember to save your calculation in case HMRC ask to see it) or use the ‘simplified expenses’ method. HMRC explains it here:
Gov.uk | Expenses if you work from home
- Trading allowance
Haven’t spent much on expenses? If your total expenses comes to £1,000 or less, then you could select the option on the Self Assessment form to use the ‘trading allowance’ instead of declaring your total expenses. This means HMRC will take £1,000 off your total income, as if it were expenses, to work out your taxable income:
(taxable income) = (total self-employment income) minus (£1,000 allowance)
Read more at the Government website:
Guidance | Tax-free allowances on trading income.
If you claim the trading allowance, you can’t also claim expenses.
5. Finish filling in the form
After each page you fill in on your Self Assessment, you’ll hit ‘Save’. You can log off and return later.
If you later realise you made a mistake, you’ve got 12 months to log back in and amend the tax return you submitted.
Have your say
Have you submitted your return or are you a last minute liability? Maybe you’re halfway there but can’t find your P60 or got stuck at the expenses section? Let us know if this article was helpful – get in touch on LinkedIn, Facebook or Twitter.
Photo by Jared Erondu on Unsplash