Don’t forget the Tax return deadline

Don’t forget the Self-Assessment Tax return deadline: What’s changed and why you can’t afford to miss it.

Around 750,000 taxpayers miss the 31^st January tax return deadline each year. Whether they are simply unaware they need to file a return or entertaining the forlorn hope that if they ignore it, HM Revenue & Customs might somehow go away, this can be an expensive mistake.

Missing the deadline can mean having to fork out hundreds of pounds in fines to the taxman, as well as the tax you owe.

There is a £100 fine for late filing, and a £10 daily fine on top of this of if you have not filed after three months, up to a maximum of £900.  After six months, HMRC will fine you £300, or 5% of the tax you owe, whatever is larger.

The deadline for the 2018-19 tax year is approaching fast, and if you have not done so, you need to act now. Going online and sorting your tax might not be as difficult as it seems, provided that you have all the relevant records with you before you sit down at the laptop.

However, you may need expert help to see where you may be paying too much. A call to a Continuum expert could provide the help you need – but first, we have prepared a list of a few changes that you need to be aware of this year.

Personal allowance

You have a larger personal allowance this year. You won’t start paying tax until you have earned £11,850, up from £11,500 the previous tax year. This will leave most people around £70 better off. Better still, when you fill in a return for the current tax year your personal allowance will be £12,500, thanks to an additional increase from April 2019.

Higher rate Income tax

Another change for this year’s return is an increase in the point at which the higher rate of income tax on income kicks in. It has gone up from £45,000 to £46,350 =- meaning some useful savings, and it will go up again when you complete your tax return for the current (2019/20 )tax year, to £50,000.

National Insurance

There is another threshold increase to remember. The Primary thresholds for National Insurance contributions changed in 2018-19, and it is now charged at 12% of income above £8,424 (£162 p.w x 52) – an increase from the previous tax year when the threshold was £8,164 (£157 p.w x 52). On earnings above £46,350, National Insurance is due at a rate of 10%.

Dividend tax

It’s not all good news. The amount of dividend income you can earn from investments was slashed in 2018 from £5,000 to just £2,000.

Many people could be caught out – especially those who have inherited portfolios of shares. Tax on dividends is charged at 7.5% for those liable for basic-rate tax, 32.5% for higher-rate payers and 38.1% for those taxpayers who pay the top rate.

Planning your investment portfolio is essential. There are ways to reduce tax liabilities – talk to a Continuum investment expert.

Mortgage interest relief for Buy to Let Landlords

Introduced in 2017, tax relief on mortgage interest enjoyed by landlords has been gradually replaced with a 20% basic tax credit which can be offset against mortgage interest. For this tax return (2018/2019), landlords get tax relief on 50% of their costs at the rate at which they pay income tax and the rest via the 20% reduction.

What about pensions?

Tax relief is available on pension contributions at your highest rate of income tax. Higher or additional rate taxpayers can claim an additional 20% and 25% tax relief respectively if they are not in a net-pay or salary-sacrifice pension arrangement through their employer but instead make direct pension contributions. Remember that the changes to tax thresholds may complicate things – you need to look at your figures carefully.

In some circumstances, you can also elect to carry the contributions back to the previous tax year, which can mean paying less tax overall.  Help from a Continuum pension expert is vital if you want to do this.

Do you need help from Continuum right now?

Such things as capital losses and contributions to venture capital schemes can affect your tax position – as could a decision to backdate a contribution to your pension to cover a previous year’s allowance.

There is not a great deal of time left, but if you do have any questions about your tax position, a call to our tax experts at Continuum could make it easier to deal with the stress of self-assessment, and cut the amount you need to pay.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action. 

The value of investments can fall as well as rise and you may get back less than you invested.

Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances.

This blog has been compiled based on our understanding of HMRC Tax & NIC rates for 2017/2018, 2018/2019 and 2019/2020 Tax years.

The Financial Conduct Authority does not regulate taxation advice.

References:

https://www.gov.uk/national-insurance-rates-letters

https://www.gov.uk/self-assessment-tax-returns