The paper tax return deadline is today, 31 October. But it is too late to dash out to the post office if you haven't sent your paperwork off already. It needs to reach HM Revenue & Customs (HMRC) by midnight tonight if you want to avoid the risk of being fined.
There is no cause for panic, though, as filing online gives you an additional three months. You just need to make sure you submit your electronic return and pay any tax that is owed by 31 January.
While January might feel a long way away this side of Christmas, you shouldn't use it as an excuse to rest on your laurels. Filing a tax return can feel like a daunting task, so it makes sense to act early to avoid unnecessary stress, delays, and the risk of fines.
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You might think tax returns are only for the self-employed and ultra-high earners. However, more people than ever will need to complete a self-assessment tax return this year, as the government kept tax thresholds frozen while cutting the dividend and capital gains allowances.
Thousands of retirees may also owe income tax on their pension for the first time thanks to generous increases to the state pension in recent years. Meanwhile, savers who have benefitted from higher interest rates could fall victim to the savings tax trap if they aren’t vigilant.
We look at the steps you need to take if you are filing a self-assessment tax return for the first time, and delve into some tips and reminders for old-timers.
Do I need to file a self-assessment tax return?
A common reason for falling foul of the taxman is simply not knowing that tax was due.
If your only source of income is your salary and you are not self-employed, then you probably don’t need to file a tax return (unless you are a very high earner). Your income tax will be deducted from your salary before you receive it through a process called “pay as you earn” (PAYE). Your employer will look after this on your behalf.
However, if you also earn income from savings, investments, a business, a second home, or another source, then it is likely that you will need to file a self-assessment tax return. The same is true if you are self-employed. We take a closer look at the rules.
Business owners and the self-employed
If you run your own business and work for yourself, you will need to file a tax return. This becomes a requirement once you earn more than £1,000 (before taking off anything you can claim tax relief on).
You will also need to complete a tax return if you are a partner in a business.
Most self-employed people have to make their payments through a process called “payments on account”. This requires self-employed people to pay their tax bill in advance in two instalments each year, one on 31 July and one on 31 January.
MoneyWeek contributor Marc Shoffman recently argued that this system is unfair, particularly for those with unpredictable earnings. You can read his piece here: “Why the payments-on-account system is unfair for the self-employed”.
Tax on savings
Most people can earn a certain amount of interest on their savings without having to pay any tax at all. However, with some providers still offering savings rates of around 5%, you might be surprised at how quickly you can exceed this threshold.
A basic-rate taxpayer with a 5% savings account could become liable for a tax bill once their savings pot hit £20,000.
If you are a basic-rate taxpayer, then you are entitled to earn up to £1,000 in tax-free interest. This is called the personal savings allowance. This falls to £500 for higher-rate taxpayers, while additional-rate taxpayers aren’t entitled to anything at all.
There is an additional allowance of up to £5,000 if you are a low earner, also known as the starting rate for savings. You will only be entitled to the full amount if you earn less than £12,570, but will still qualify for some of it up to £17,570.
Once you exceed these thresholds, you will need to file a tax return.
Tax on investments
Most investments are subject to income and capital gains tax if they are held outside an ISA. The capital gains and dividend allowances for the 2023-2024 tax year were £6,000 and £1,000 respectively, however they have been slashed to £3,000 and £500 going forward.
If you exceeded the thresholds for the 2023-2024 tax year, you will need to complete a tax return. It is worth remembering that capital gains tax is paid on investments once they have been sold. You are able to deduct any losses to help lower your capital gains tax bill.
Tax on second homes
If you own a property that you rent out to tenants, then you will be liable for tax. The rules vary depending on whether you own the property personally, or run a property business.
If you own the property personally, the first £1,000 of rental income is tax-free. Otherwise, the following rules apply, as outlined on the government website:
- If you earn between £1,000 and £2,500 a year, you need to contact HMRC.
- If you earn more than £2,500 after allowable expenses, or more than £10,000 before allowable expenses, you need to complete a tax return. Allowable expenses include things like letting agents’ fees, maintenance and repair costs, ground rent, and gardening fees.
Rental income is taxed at the same rate you pay on other forms of income, such as your salary. You will need to declare this on a tax return form.
If you have multiple properties and run them as a buy-to-let company, the rules are different. We look at the pros and cons of this approach for buy-to-let landlords in a separate piece.
Tax rules for high earners
If your annual income is over £150,000, you will need to complete a self-assessment tax return form before the deadline this year – even if all of your income comes from your PAYE salary.
However, this is changing going forward. In his 2023 Autumn Statement, former chancellor Jeremy Hunt confirmed that this rule would be abolished from the 2024-2025 tax year, simplifying the tax return process “for up to 338,000 taxpayers”.
Remember, although we are in the 2024-2025 tax year currently, your tax return is retrospective, meaning it covers the 2023-2024 tax year.
Parents who pay the child benefit charge
If you receive child benefit but aren’t eligible for the full amount, then you need to return the excess by completing a tax return form.
Child benefit payments are means-tested, and are only paid to families where the highest-earning parent earns less than a certain threshold. Hunt raised this threshold from £50,000 to £60,000 in the Spring Budget on 6 March. However, this kicked in on 6 April 2024, so it won’t impact your upcoming tax return, which covers the 2023/2024 tax year.
As a result, if you have received child benefit but your salary (or your partner’s salary) exceeds £50,000 (individually, not jointly), you need to complete a tax return form.
Other untaxed income
HMRC points out that you may also need to complete a tax return if you received any other untaxed income, such as Covid-19 support payments, tips and commission, or foreign income.
If you are still not sure whether you need to complete a tax return, you can use HMRC’s online tool to help.
Does the taxman owe you money?
Sometimes, it is in your best interest to file a tax return – even if you don’t owe HMRC money. For example, if you are a higher or additional-rate taxpayer making contributions to your workplace pension scheme, HMRC could actually owe you money in the form of pension tax relief.
All savers get the 20% basic-rate tax back automatically. However, if you are a higher or additional-rate taxpayer, you may need to claim the rest back yourself, depending on the type of pension scheme. You can do this by filling out a self-assessment tax return form.
Likewise, if you have started drawing from your pension pot and HMRC isn’t applying the correct tax code on your pension income (this is very common), then you can complete a tax return to claim a refund. Alternatively, you can avoid this overpayment in the first place by providing an up-to-date tax code or P45 to your pension provider before making your first withdrawal.
Step-by-step guide to filing a tax return
If you haven’t filed a tax return before, the first thing you need to do is register with HMRC. You will also need to do this if you registered with HMRC in previous years, but didn’t complete a tax return last year.
The registration deadline was 5 October 2024, and has already passed. If you missed it, the Low Incomes Tax Reform Group says you might still be able to avoid a ‘failure to notify’ penalty if you file your return online and pay any income tax owed by the 31 January deadline.
Once you have registered, you will receive your Unique Taxpayer Reference number.
When completing your tax return, you can choose to do it online or by filling out a paper form. As introduced previously, you have now missed the paper tax return deadline (31 October) so should shoot for the 31 January deadline instead.
The form asks for some personal information such as your name, address, date of birth, National Insurance number, 10-digit Unique Taxpayer Reference number, and your employer reference code (if you have one).
You should also collect any relevant documents and have them to hand when filling out the form. These could include your P60, bank statements, student loan statements, and any investment account statements.
The tax return form is divided into several sections which ask you to detail:
- Any income you received (e.g. through interest, dividends or your pension)
- Tax reliefs
- Student loan repayments
- Any money you owe as a result of the child benefit charge
- Any marriage allowance you would like to transfer to your spouse or civil partner
Depending on your circumstances, you may need to complete some separate supplementary pages. For example, you will need to do this if you are self-employed.
How do you pay any tax that is owed?
If you owe less than £3,000 on your tax bill, you can usually pay it through your PAYE tax code. HMRC will then automatically collect it from your salary. It will be deducted in instalments over the next 12 months.
Alternatively, you can pay through your online bank account, by debit or credit card, at your bank or building society, or by cheque through the post. You should follow the guidance shared on the government website.
Once you have made the payment, you should also check that it has been received by logging into your HMRC online account 3-6 working days later.
What happens if you have paid too much tax?
If HMRC owes you a refund, you can complete an additional section on the form to detail how you would like to receive this (by bank payment or cheque). If HMRC already has details for you (e.g. credit or debit card information), they will try that first.
When is the best time to file a tax return?
It is usually good advice to act well in advance of the deadline. Filing your tax return early means you will have plenty of time for any queries that come up. It can also help you avoid unnecessary stress and delays.
Filing early can also help with budgeting, as you can set up a budget payment plan to make weekly or monthly direct debit payments towards your tax bill. Refunds of overpaid tax will also be paid as soon as the return has been processed.
In recent years, HMRC has seen more and more customers file their tax returns early. In April 2023, 246,210 people submitted their returns in the first week of the new tax year. In April this year, 295,250 people did the same.
Alice Haine, personal finance analyst at wealth management firm Evelyn Partners, says: “Filing early gives people time to ensure the information they input is correct, avoiding the stress that comes with leaving it to the last minute, and struggling to find the relevant paperwork. It also reduces the risk of missing the deadline and being fined and can ease the burden of having an urgent big bill to pay.”
If you have any difficulties filing your tax return, you can contact HMRC’s self-assessment helpline on 0300 200 3310. Its opening hours are Monday to Friday, 8am to 6pm.
Is everyone eligible to file their tax return online?
While filing your tax return online will buy you a little extra time, bear in mind that not everyone is eligible for this option.
“If you need to fill in the foreign income and gains, or the trust and estate pages – you’ll be required to do it with a paper form as they’re not available to complete online,” warns Alistair Douglas, chief executive of fintech company TotallyMoney.
Misunderstanding the process and filing late as a result could cost you. HMRC charges a late penalty of £100 for those who are up to three months late. You will have to pay more if you file even later than this, or if you pay your tax bill late.
Interest is also charged on late payments, set at the base rate plus 2.5%. Given how high interest rates are at present, this means you could be slapped with a hefty interest rate penalty of 7.5%.
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