How to deal with self-assessment tax returns after a very trying year

Covid-19 has prompted HMRC to be lenient this year

(Image credit: © OLI SCARFF/AFP via Getty Images)

The tax-return deadline of 31 January is looming, but millions of us still haven’t filed our self-assessment forms for the financial year between 6 April 2019 and 5 April 2020. And this year, thanks to the fallout from Covid-19, the process could prove particularly protracted.

“Each year about 11 million people have to complete a self-assessment tax return,” says Rupert Jones in The Guardian. “There were still 5.4 million taxpayers who hadn’t filed by 31 December 2019 and 5.5 million who were yet to file by 31 December 2018.”

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The Covid-19 excuse

“The taxman is developing a simplified ‘Covid-19 excuse’ form that will allow the self-employed and landlords to miss the January 31 deadline for filing and paying their returns,” says David Byers in The Sunday Times.

“It will allow those who say they have a reason for late filing due to the pandemic to avoid stiff penalties.” One valid reason for a delay could be “pressures of home schooling”, says Rob Davies in The Guardian. “People who can show that either they or their accountant have recently been ill with the virus are also likely to be shown clemency.”

File on time

Usually, if you miss the deadline you face escalating fines that start at £100 for being three months late. After that you are liable for an additional £10 a day up to a maximum of £900. It continues with fines of a further £300 or more if you are more than six months late. This year these fines are being waived if you are late owing to Covid-19, but you will have to pay interest on unpaid tax at 2.6%.

If you do file your tax return before 31 January, then you may not need to pay your bill by that date. “Once an individual has done their 2019-2020 return, and knows their tax calculation, they can set up a payment plan, provided they owe less than £30,000,” says Jones in The Guardian.

“They can then choose how much to pay straight away and how much to pay each month by direct debit, and it can all be done online. Needless to say, you’ll have to pay interest.”

“We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away,” HMRC has said. If the pandemic prevents someone from doing so, “we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that”.

Tax relief for working from home

While the bulk of Covid-19’s effect won’t be felt with this round of tax returns – they cover the year to 5 April 2020 – you do need to think about how your work was affected in the early days.

The first national lockdown began on 23 March 2020, but many people weren’t in the office before then. If your employer had told you to work from home in the 2019-2020 tax year, then you can claim tax relief for each week.

“If you go for the easy, no-receipts-required route, your claim will be based on the assumption that you have incurred costs of £6 a week, and you will get back the tax you would have paid on that,” says Jones. That’s £1.20 a week for basic-rate taxpayers and £2.40 for higher-rate taxpayers.

Anyone who thinks working from home has cost you more than £6 a week can put in a claim for more. However, you have to provide evidence of the cost increases and explain why they were directly related to your work from home.

Those that don’t fill in a tax return can claim the relief via a specific “working from home” form on Gov.uk. Otherwise, you’ll need to claim it as an expense on your self-assessment form.

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Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.