Taxpayers are overlooking a self-assessment tax return filing deadline that could provide a cash-flow advantage, says accountancy firm Blick Rothenberg.
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 they have sufficient wages or pension to enable the tax to be collected in this manner).
Suzanne Briggs, director at Blick Rothenberg, says: “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.”
However, taxpayers who take this option also need to be aware that HMRC is now making in-year adjustments to tax codes by using ‘dynamic’ coding if it calculates that a taxpayer will underpay tax during a tax year.
Ms Briggs says: “For example, if an individual receives a bonus or is receiving interest on 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.”
Festive season frees up time for tax paperwork
HMRC is reminding “self-assessment customers” to file their 2016/17 tax returns online before the 31 January 2018 deadline. It says 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.