Expert Eye: Simon Shaw of Duncan and Toplis considers the approaching tax return deadline
As we head towards the January deadline, now is a good time for taxpayers to check their tax position, writes Simon Shaw of Duncan and Toplis.
Taxpayers who are self-employed will be used to preparing and submitting their 2024 tax return to HM Revenue and Customs before the January 31, 2025, deadline.
The 2023-24 tax year might be a bit different for some self-employed taxpayers as this is the year transitional rules came into effect.
This means that profits are taxed for the tax year instead of a different period which might not have aligned.
Taxpayers need to ensure that the correct period is reported and taxed, and that they take advantage of any overlap relief available and spreading of the transitional profit.
The transitional rules are not straight forward so need to be carefully considered when completing the tax return.
The self-employed will also be used to paying the balance of their 2024 tax at the end of January 2025, along with their first payment on account against their 2025 liability.
Now is a good time to review the expected results for the 2025 year and consider if the taxable profits will be different to 2024. This might also be impacted by any significant capital costs in either year, for example the purchase of new equipment. If you expect the 2025 tax liability to be less than the previous year you can make a claim to reduce the payments on account due in January and July. Likewise if tax is expected to increase now would be a good time to budget for the increased payments due in January 2026.
Some individuals may carry out a low level of self-employment in addition to their main job.
If the income from self-employment, before deduction of expenses is less than £1,000 a year you will not have to tell HM Revenue and Customs. Where gross income is more than £1,000 a year a tax return is required, even though a £1,000 trading allowance is available to deduct from this income, or the actual expenses can be deducted if these are more than £1,000.
For individuals there are many reasons why a tax return might be required. The increases in interest rates paid to savers, means that many savers may have exceeded the personal savings allowance of £1,000. Although most taxpayers will have the tax due on their interest collected by an adjustment to their PAYE, there could be circumstances where this is not possible and a tax return is required. There is also a requirement that any individual who receives interest and other investment income of more than £10,000 a year must register to complete a self-assessment tax return.
Another reason a tax return might be required is where Child Benefit is received and one parent or carer is a high earner. For the 2023-24 tax year a high earner was someone earning more than £50,000. Although this has increased to £60,000 for the current tax year, this limit applies to the highest earner and cannot be shared. This means that the highest earner may need to pay this tax charge even if they do not receive the Child Benefit themselves.
For employees who owe tax, this can be collected through your PAYE coding, so long as the amount due is under £3,000, and the tax return is submitted online before December 30.
There are lots of reasons why a tax return might be required. Ensuring this is completed and any tax due is paid before January 31 will avoid automatic penalties and interest which are charged by HM Revenue and Customs.