A self-assessment tax return filing deadline available until 31 December is being overlooked and could provide a welcome cash-flow advantage for taxpayers.
Taxpayers who take this option also need to be aware of HMRC’s new 'dynamic' coding system, which could impact their take home pay with in-year adjustments to tax codes.
HMRC have recently issued a timely reminder for 'self-assessment customers' to file their 2016/17 tax returns on-line before the 31 January 2018 deadline. Apparently, 870,000 people missed the filing deadline last year, resulting in automatic late filing penalties.
Over the festive season, many people take advantage of having some additional time to bring their paperwork up to date. Last December according to HMRC, 6,214 people filed their tax returns on Christmas Eve, 1,944 on Christmas Day and 6,200 on Boxing Day.
Suzanne Briggs, Director, said: “There is another advantage to filing a tax return before the end of the calendar year. If an individual has a tax liability of less than £3,000, provided they file their tax return before 31 December 2017, then they can elect to have the tax liability collected via their salary or pension from 6 April 2018 (assuming that they have sufficient wages or pension to enable the tax to be collected in this manner).
“This provides a welcome cash-flow advantage as the tax does not have to be paid in one lump sum on 31 January 2018 and does not start to be collected until 6 April 2018, effectively by way of monthly instalments.”
She added: “However, taxpayers who take this option also need to be aware that HMRC are now making in-year adjustments to tax codes by using ‘dynamic’ coding if they calculate that a taxpayer will underpay tax during a tax year.
“For example, if an individual receives a bonus or is receiving interest income in excess of the Personal Savings Allowance (PSA), HMRC can make a real time adjustment to the tax code to collect the potential current year tax underpayment. If this happens, and the taxpayer is having tax ‘coded out’ for an earlier tax year, it could severely impact their take home pay.
“In this situation, it is important to regularly check the tax code being applied to a salary or pension to be prepared.”
For more information, please contact Suzanne Briggs.