The clock is ticking toward the January 31, 2025, deadline for Self Assessment tax returns, creating urgency for many taxpayers across the United Kingdom. With economic pressures rising, particularly from the cost of living crisis, it’s more important than ever for individuals to be aware of their tax obligations and take the necessary steps to avoid penalties.
According to the latest guidance, any individual who falls under specific categories must complete and file their Self Assessment tax returns by the end of January to sidestep fines. This includes self-employed persons, partners within business partnerships, or those with taxable incomes exceeding £150,000. Individuals who have had to pay capital gains tax or those facing high-income Child Benefit repayments will also need to file.
Over three-and-a-half million people have already filed their returns, and many financial experts, including Aatif Malik, director at Tax Accountant, urge taxpayers to prepare and file early. "Missing the deadline can incur fines..." he mentions, referencing the potential financial liabilities for those who delay their submissions.
Even pensioners must pay attention to these deadlines. While many believe income from pensions, such as the State Pension, is exempt from taxes, Malik clarifies, "Many people assume income from pensions is not taxable, but this isn’t the case.” Indeed, individuals receiving both private pensions and the State Pension typically do not need to file tax returns for these incomes, as their pension providers deduct taxes through the Pay-As-You-Earn (PAYE) system before they receive their payments.
For pensioners whose only income is the State Pension, if their income exceeds the Personal Allowance of £12,570 for the 2023/24 tax year, HMRC sends them a Simple Assessment Tax Bill. This means they are not outright required to file, but still are accountable for taxes owed above the Personal Allowance threshold. Their tax obligations are calculated under separate criteria than those who are self-employed.
The Self Assessment process is not exclusive to self-employed individuals. Any taxpayer receiving income from renting properties, tips, commissions, or untaxed savings must be diligent. For those earning any extra income from these sources, even from casual selling on platforms like eBay, if the earnings exceed £1,000, filing is needed.
Those impacted by the upcoming deadlines are urged to remain vigilant. Taxpayers unsure whether they need to file may check HMRC’s online resources for guidance. This vigilance is particularly important as HMRC has indicated penalties will increase the longer one delays not only filing but also paying owed taxes. Therefore, enlightened awareness and prompt action can significantly benefit financial planning for 2024.
Aatif Malik also advises all individuals, particularly pensioners confronting new incomes and potential tax responsibilities, to reach out and clarify their necessities with HMRC. "Knowing where you stand...will help you find clarity as to whether or not you need to submit..." he states, encouraging direct communication and the utilization of resources available for guidance.
During these challenging economic times, remaining informed and proactive about financial responsibilities, including tax returns, can help individuals navigate hurdles and mitigate penalties. Not only does this promotion of financial literacy alleviate financial pressure, but it also enhances personal monies management, laying the groundwork for future financial stability.