The self-assessment tax return deadline is almost here – what to know and why you should think of your pension

id

Jenny Holt, Managing Director Customer Savings & Investments at Standard Life, commented: "The deadline for filing self-assessment tax returns is fast approaching, with returns needing to be submitted online by midnight on 31st January. So, if you're one of the categories of people who needs to send a tax return - for example if you're self-employed or earning a taxable income of over £100,000 - then now is the time to act.

"Tax returns can fill people with dread, but it's important to understand what's required and file it on time to avoid any penalties which can be costly. For many higher earners, even if you are not in a category that needs to submit a return, accurately completing a self-assessment can result in boosting pension contributions as well as paying less tax in the short term, so it's well-worth the paperwork. Tackling the forms in advance, rather than leaving it to the last minute, will give you the time to gather the information needed and make the submission as stress free as possible. If this is your first time filing a self-assessment tax return, you'll need to register which can take up to 20 days, so you might miss the deadline if you've not done this yet. However, the sooner you get going, the earlier it will be in, and you'll be ahead of the game for next year."

Jenny Holt outlines the key things to be aware of when it comes to self-assessment:

What is self-assessment and who needs to submit?

"Self-assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax. If you are employed, your income tax is usually automatically deducted from your wages by your employer, but if you are self-employed or receive any other income, you will need to submit a self-assessment tax return each year to pay income tax and National Insurance.

"You'll need to file a self-assessment 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)
• you were a partner in a business partnership
• you earned £100,000 or more

"If you need assistance with your self-assessment, then you can contact HMRC , or find an accountant accredited in the UK to help. You can also appoint a relative or friend to fill in and send your tax return on your behalf ."

Why should I be thinking about my pension?

"If you are earning £50,271 a year or over, not completing a self-assessment tax return could lead to you missing out on valuable tax relief on pension contributions. Anyone with a pension receives 20% tax relief on every contribution they make, and this is added automatically. However, higher rate taxpayers need to claim the extra 20% of tax relief they are entitled to, which will then be repaid via a tax rebate, a change in tax code (which will mean you'll pay less tax the following year) or a reduction in your tax bill for the current year. This is particularly important for those earning between £100,000 and £125,140 who can take back some of their personal allowance and receive relief at an effective rate of 60%. If you're using salary sacrifice to make contributions this might not be necessary - you can always check with your employer if unsure.

"Higher rate taxpayers should complete a self-assessment return every year they've paid higher rates, and anyone that hasn't done this may have built up unpaid tax relief in arrears. It's worth investigating if you think this applies to you, as you can make claims for up to four previous tax years, meaning you could be owed thousands of pounds from the government. HMRC doesn't tend to prompt non-self-employed people to submit a self-assessment, so any higher rate taxpayers who pay their tax through PAYE need to actively request to submit a tax return."

Is there anything else I should be aware of?

"Once you start completing a self-assessment, you will be expected to complete one in each future year. Be sure to make a note in the calendar for when the time comes again.

"Another important reason to have a good grip on your tax return if you're a higher earner is there's a chance you might have exceeded your annual allowance, and it's your responsibility to disclose this. The annual allowance is the amount you can pay into your pension each year with tax relief, and this sits at £40,000 for most people. If you've already started accessing your pension your annual allowance will reduce to £4,000, and if you earn £200,000 or more your allowance could begin to be 'tapered' down to £10,000."

Time to think about bonuses

"While not related to self-assessment directly, this is often a good time of year to think about pensions if you're lucky enough to receive an annual bonus, which are often paid just before tax year end in April. Many employers will give you the option to divert some or all of your bonus into your pension. Paying bonus money into in your pension could mean you get to keep more of it, maximise your pension benefits and take full advantage of the power of compound growth, or ‘snowballing'. This is when you achieve investment growth not only on the money you've invested, but also on the growth you might have already experienced. Unlike most savings accounts now, this will give you the potential to match, or even beat, inflation."

How do you submit a tax return?

"After you've registered, HMRC will send your Unique Taxpayer Reference number and instructions to set up your Government Gateway account. Once you've done this, you'll be sent an activation code to finish setting up the account. You'll then be able to use the HMRC online service to submit your return. Alternatively, you can send your tax return via post."

What happens if you miss the deadline?

"If you fail to file your return, file it after the deadline, or fail to pay your tax bill, you'll incur a penalty. If your return is up to three months late, you'll be charged £100, and if it's any later then you could be charged an extra £10 a day up to a maximum of £900. If you're late paying your tax bill then you'll be charged interest on late payments too. You can appeal against a penalty if you have a legitimate excuse, but it's far less hassle to file your return on time and pay your bill in the first place!"

-Ends-

Enquiries

Notes to editors:

About Standard Life

• Standard Life is a brand that has been trusted to look after peoples' life savings for nearly 200 years
• Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers' pension scheme.
• Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We're proud to be building on nearly 200 years of Standard Life heritage together
• Our products include a variety of Pensions, Bonds and Retirement options to suit people's needs, helping our customers to invest and save for their future. We're proud to offer a leading range of sustainable and responsible investment options.
• We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs, and plan a future they feel confident about
• The value of investments can go down as well as up and may be worth less than originally invested.