25 October 2021
Tax obligations of individuals
If your only income is from your wages or pension then the income tax is usually deducted automatically at source. For example, in case of the employment the tax is withheld by an employer, acting as an agent for HM Revenue and Customs (HMRC). It is done under the ‘Pay As You Earn’ (PAYE) system.
If you have other income (for example, money from renting out a property, income from investments and dividends, foreign income, etc.) then you must fill in and send a tax return to HMRC. It is also necessary to send a tax return if in the last tax year you were
self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)
a partner in a business partnership
To collect Income TaxHM Revenue and Customs (HMRC) uses a system known as ‘Self Assessment’.
Deadlines: Tax Returns
The tax year in the UK runs from 6 April in the current year and ends on the 5 April of the following year. So, the last tax year started on 6 April 2020 and ended on 5 April 2021.
It is necessary to submit the tax return and pay any money you owe by the deadline otherwise you’ll pay a penalty. Appeal against a penalty is possible only if you have a reasonable excuse.
The deadlines for the submission of the tax returns are the as follows:
5 October 2021 – registration for Self Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership;
31 October 2021 (midnight) – submission of the paper tax returns;
31 January 2022 (midnight) – submission of the online tax returns.
So, if the tax liability is self-assessed, the filing date for the financial year 2020/21 is 31 October 2021 for paper tax returns or 31 January 2022 for online tax returns. If you wish HM Revenue & Customs (HMRC) to compute the tax liability, then the filing date is 31 October.
Deadlines: Payment of the Tax
The tax has to be paid by midnight 31 January 2022 the latest.
There’s also a second payment deadline of 31 July if you make advance payments towards your bill (known as ‘payments on account’).
Usually, you have to make 2 payments on account every year unless:
your last Self Assessment tax bill was less than £1,000;
you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings
Each payment is half your previous year’s tax bill. So, the payments are usually due by midnight on 31 January and 31 July.
If you still have tax to pay after you’ve made your payments on account, you must make a ‘balancing payment’ by midnight on 31 January next year.
For further information on any of the points above, please, contact
Yuliya Shved at: yuliya@lexefiscal.com or
Dr Clifford J Frank at: clifford.frank@lexefiscal.com