Is the self-assessment tax return a valuable tool in the midst of a pandemic?

Posted on 2nd December 2020 by Streets What's trending?


Image to represent Is the self-assessment tax return a valuable tool in the midst of a pandemic?

Every year the chore of the self-assessment tax return descends upon many of us and human nature prevails; leaving things to the last minute.


However, the challenge of 2020 and the threat this has posed on individuals finances has led many to take stock of their financial affairs. Not only in wanting to pinpoint where they can cut costs but also to have a better understanding of their finances in general.

In light of this new mindset many of us are in, we may see the self-assessment tax return with renewed value; a chance to properly understand what tax is due, why and any planning that could improve our position for future tax years.

What are the benefits of completing your tax return earlier?

  • If you are employed and the wrong tax code has been used

Where the tax code was too high you may have overpaid tax, the sooner your tax return is submitted the sooner you will receive your repayment.

If tax has been underpaid, then submitting your tax return online before the end of December means you can elect for the underpayment to be collected from your future tax code, provided it is below £3,000. 

  • If you make payments on account, they could be reduced

You may be self-employed or a landlord and required to make payments in advance, based on the previous year’s tax liability. When preparing your 2019/20 tax return, if your 2020/21 profits will be lower, you can look to reduce your payments on account.  

  • More time to plan to pay your tax

By submitting your tax returns as soon as possible, you have more time to prepare for the tax liability due. In the event that you may struggle to pay all or part of any tax liability due, you will be in a better position to explore the possibility of a deferment or repayment schedule with the Revenue.

  • More time to consider if you are claiming available reliefs and allowances

A more thorough approach can ensure you claim the tax relief and allowances that you are entitled to, for example:

o   Gift aid donations

o   Pension contributions

o   Expenses such as working from home

o   Transferring the marriage allowance

  • More time to consider planning your income tax efficiency for the following tax year

When preparing your tax return, most of the opportunities to improve your position have passed and that is why it is vital to consider the tax year you are in whilst you can make changes, for example:

o   If you are married or in a civil partnership, is your income evenly assessed across the two of you or does one of you fall into the higher rates of tax and the other does not?

o    Could you benefit from Child Benefit if your income has reduced?

  • Using this annual task as a time to consider your affairs on a longer-term basis

As you set aside time for this annual task, you could also use it as an opportunity to ensure you are planning for the long term too, considering things such as:

o   Is my pension pot going to be sufficient for when I come to retire?

o   What about my wealth in general, is it time to consider Inheritance Tax?

With the turbulent year we have faced, some individuals may be considering putting off their 2019/20 tax returns until after the deadline, accepting the initial £100 penalty. However, in view of the number of benefits from which individuals can improve their position by earlier preparation, we would always encourage individuals to invest the time in preparing their tax returns without delay.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Boost Your Restaurant's Cash Flow with These Top Tips!

Maintaining a healthy cash flow is crucial for the success of any restaurant. Here are five key strategies to get you started: Optimise Menu Prices Ensure your dishes are priced for both competitiveness and profitabilityStreamline InventoryReduce waste and free up cash by using smart inventory management techniquesNegotiate with SuppliersBetter terms ...


Property Finance - unlocking opportunities with confidence and support

Exploring, navigating and understanding the complex landscape of property finance options can not only be time consuming, but hard to understand with the diverse range of financing options that are available in the market. It is essential from the outset for business owners to carefully evaluate their financing and ...


Child Benefit Updates

You may have heard about the recent changes to the High Income Child Benefit Charge which were announced in the Spring Budget. This is something that will affect several of our clients, and the changes can influence whether claims are made for child benefit or whether those that ...


You might also be interested in...