HMRC has a number of tax deadlines spread throughout the year for self-employed workers and certain benefit claimants. The next tax year will start on April 6, 2022 but registrations for Self Assessments must be made by October 5 for those who are self-employed, a sole trader or registering a partnership.
How to register and send a return
Britons will need to register if they did not send a tax return last year.For self-employed workers, they can register online if they have not filled in a return before.
This is done through the Government’s website and they’ll need to sign in to your business tax account and add a Self Assessment. To do this, a Government Gateway user ID and password will be needed which can be created during the process.
Self-employed workers will then receive a letter with their Unique Taxpayer Reference (UTR) number within 10 days which is needed to file a return. They’ll then receive another letter with an activation code for their account.
Freelancers who have filed an online return before will be able to re-register using a CWF1 form if the work they plan to do is different to what they did before. If the nature of the work remains the same, they’ll just need to sign into their online account to register a return.
Partnerships are registered through a nearly identical process.
It is important to get these registrations completed before the oncoming deadline as penalties could be imposed if they’re missed. Workers will be issued with a penalty if they miss the deadline for submitting a tax return or paying a bill.
A late filing penalty of £100 if their tax return is up to three months late. More will have to be paid if further delays are seen. Additionally, interest will be added onto late payments.
All partners in a partnership can also be charged a penalty if a tax return is late, which could prove to be especially costly. Outside of the October deadline, there are also two more deadlines to note for the current tax year.
Online tax returns must be fully completed by midnight January 31, 2022. Final tax bills must also be paid by midnight January 31, 2022.
With all these differing rules and dates, it could prove tricky for workers to keep up and on this, the Chartered Institute of Taxation (CIOT) recently called for a rethink on the UK’s “peculiar” tax year schedule.
‘Cut State Pension age to 63 or lower!’ Too many die without a penny [INSIGHT]
‘This is not excuse for the Chancellor to raid pensions’ – tax warning [WARNING]
Furlough: Workers face ‘financial nightmare’ as HMRC recoups payments [EXPERT]
Is it time to ditch the “quirky” April 5 tax year end?
The CIOT argued the UK should abandon its use of the April 6 to 5 tax year system and instead move to a more “modern and logical tax year”. This call followed the publication of a report by the Office of Tax Simplification (OTS) which stated there would be “clear advantages from having a different tax year end date”.
While keeping a December 31 year end on the table as a long-term option, the OTS recommended that in the short-term the Government puts in place arrangements to enable self-employed taxpayers and individual landlords to use March 31 in place of April 5 when reporting their income, ahead of the “Making Tax Digital” for Income Tax plans which come into use in April 2023.
CIOT explained the UK is very rare in having an “April year end”, with Most other countries, including the USA, France, Germany and Ireland, aligning their tax years to the calendar year.
John Barnett, Chair of CIOT’s Technical Policy and Oversight Committee, commented: The Government’s 10-year review of the UK’s Tax Administration Framework is a golden opportunity to ‘think big’ about modernising the UK’s tax system and for the Government to consult on moving the tax year end from April 5 – either to March 31 or December 31.
“In CIOT’s view it is time for the UK to make this change. Retaining a 5 April tax year end makes life harder for taxpayers and increasingly complicates interactions with other countries’ tax systems.
“However the Government should proceed carefully. Changing the tax year should be a longer term plan – perhaps over four or five years – because there will be costs and transitional rules to address and individual taxpayers, businesses, tax advisers, accountants, HMRC and other government departments will need time to prepare.”
Mr Barnett continued by highlighting how the UKs tax calendar has a negative impact on those who want to take their business global.
“There is a risk of international tax leakage that comes with the UK’s unusual tax year, he said.
“It makes it harder for HMRC to match up the data that is coming in under exchange of information agreements from other tax jurisdictions, many of which use a December 31 year end. This hinders their compliance activity and is a nuisance for taxpayers who might receive an inappropriate ‘nudge’ letter because HMRC are not able to match the data correctly.
“The UK’s odd tax year also makes tax calculations more complicated for individual taxpayers who interact with other jurisdictions, for example internationally mobile employees and people who were not born in the UK. This includes difficulties reconciling overseas income which may have been calculated using a December 31 year end. There is a significant number of such people in the UK.”
Complex rules will be changed
In regards to complexity, the Government has already announced plans to simplify the tax system for self-employed workers. In late-July HM Treasury put plans in motion to overhaul the entire process and make it easier for small businesses to fill out their forms and cover tax costs.
The changes, which will come into force by 2023 and have been drawn-up alongside representatives of small businesses, will mean workers will be taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year.
HM Treasury explained this should help them spend less time filing their taxes, aligning the way self-employed profits are taxed with other forms of income, such as property and investment income.
Jesse Norman, the Financial Secretary to the Treasury, commented on how important these changes are in the face of mounting difficulties.
“These complex rules lead to thousands of errors and mistakes in self-employed tax returns every year,” he said.
“Simplifying them will allow self-employed people to spend less time doing tax admin and more time growing their business and creating jobs.”