Tax and benefit deadlines - act now!
For some years January has been billed as the month for tax action, but there are other things to think about too, particularly if you are receiving tax credits or benefits.
Low Incomes Tax Reform Group has set out below some reminders to help you avoid a range of pitfalls and ensure that you receive what you are due.
Tax
File your 2008/09 self-assessment return online by 31 January
If you file your tax return online, you must do so by 31 January. And if you were sent a paper return, but did not file it by the paper deadline of 31 October 2009, you can instead file online provided you do so by 31 January. But if you have filed a paper return late, you cannot file again online to escape a penalty.
If you have not filed online before, you have to register first and wait for HMRC to send you your user ID and activation PIN in the post. You will normally have to wait up to seven days for HMRC to post this information to you, so it is prudent to register well before the deadline - so make sure you do this now!
Pay your outstanding tax on or before 31 January
- 2008/09
31 January is the deadline for payment of your tax liability, or remaining tax liability, for the year 2008/09. Note that the term ‘tax liability' includes more than just income tax - that is to say it can also include capital gains tax, student loan repayments and Class 4 National Insurance contributions, if any are due.
Payment can be made online from HMRC's website. But, watch out! If you are paying by credit card, you will be charged a non-refundable transaction fee of 1.25%.
- 2009/10
31 January is also the deadline for the first payment on account for 2009/10, if one is due. If you are not sure whether you need to make payments on account, how much they will be, and how to reduce them, guidance is available on the LITRG website - litrg.org.uk.
If you think you will not be able to pay, HMRC should respond sympathetically if you apply for time to pay before 31 January. The Department is more lenient to those who ask for more time before a tax liability falls due, than to those who miss the payment date then ask for time to pay as an afterthought. So if you are worried you will not be able to pay, contact HMRC as soon as possible. Individuals not in business should contact HMRC on 0845 366 1204; businesses should use the Business Payment Support Line on 0845 302 1435.
Penalties for late self-assessment tax return filing
There is an automatic penalty of £100 for late filing, but the penalty is capped by the amount of tax outstanding. In other words, you will not have to pay the full £100 if you owe less than that amount in tax on 31 January; and if you owe nothing on that date, you will not be charged any penalty.
This can work in your favour if you wish to file on paper, but have missed the 31 October filing deadline. Technically, a 2008/09 paper return filed after 31 October 2009 is late (even if it is filed on or before 31 January 2010) so you will have incurred a late filing penalty.
Remember, though, that you cannot file a paper return late, then - in an attempt to escape a penalty - file again online. However, if you have paid all the tax due for 2008/09 by 31 January 2010, your £100 penalty will be reduced to nil. This ‘capping' rule is due to be phased out in favour of an automatic fixed penalty but continues to apply this year.
If you do not think that you can do the sums for yourself, then you need to hire a tax adviser or, if you have a low income and cannot afford to pay for an adviser, you can try the charities TaxAid or, if you are a pensioner, TaxHelp for Older People. But bear in mind that everyone will be extremely busy at this time of year.
Also, if you try to file online, but cannot because of a fault in the software, you can instead send in a paper return and claim reasonable excuse for filing it after the paper deadline of 31 October. HMRC will accept a reasonable excuse claim in such circumstances, which means that there will be no late filing penalty.
Reclaiming tax for earlier years
Currently, claims for repayment of tax may be made for five years and ten months following the tax year to which the repayment relates. 31 January 2010 is therefore the last day for making any such claims for repayment of tax for 2003/04. After 31 January, 2003/04 falls away and the first year for which a claim can be made becomes 2004/05. Exceptionally, a concession allows repayments to be made for earlier years in cases of official error by HMRC or another government department.
Note, however, the rules are changing from 6 April 2010. From that date, many tax repayment claims will be limited to the last four tax years, although following campaigns from LITRG and other groups, commencement of this reduced time limit is to be partly deferred until 6 April 2012 so that those taxpayers not in self assessment can continue to make claims under the old rules for a further two years.
VAT
As many will already be aware, value added tax has reverted to 17.5% from 1 January. The impact on people with low incomes should be relatively small as food, children's clothing and domestic fuel are not affected. Remember, though, that disabled people and those aged 60 or more can benefit from certain reliefs from VAT.
Tax credits
Renewals
The deadline for renewing a tax credit claim is 31 July following the end of the tax year - in other words, if you received tax credits in 2008/09, and wished to renew for 2009/10, you would have had to file your renewal papers, or renew by telephone, on or before 31 July 2009. In most cases this would involve reporting details of your income for 2008/09.
If you were not able to report your 2008/09 income by 31 July 2009 - for example, if you were self-employed and your accounts were not yet ready - but you nonetheless returned an estimate of your income, then you have until 31 January 2010 to confirm that estimate, or to report the actual income figures.
Similarly, if you did not renew by 31 July 2009, but had ‘good cause' for not doing so, you have until 31 January to return your renewal papers (or renew by telephone) and have your claim reinstated. ‘Good cause', according to HMRC, includes a serious illness such as coma, heart attack, stroke or serious mental or life-threatening illness; serious illness of a close relative for whom the claimant is caring; bereavement of a close relative or partner; or some other ‘exceptional reason'.
Benefits
Christmas bonus
If you are a pensioner, or in receipt of certain benefits, you may have been eligible for the £10 Christmas bonus, which is usually paid in early December. Last year, another £60 was added to the bonus, which was paid between January and March 2009. This was, however, a one-off payment and is not to be repeated this year.
Do remember though that neither the usual £10 nor last year's additional £60 is taxable. For some people, the payments will just end up in your bank account without a specific indication as to what they are for, so please be careful that you do not add them to other taxable payments if you have to complete a tax return.
Housing costs
In January 2009 article, LITRG outlined a range of housing measures introduced to help people due to the economic climate. These were temporary measures that the Government said would be reviewed once housing market conditions improve.
Part of these measures included fixing the mortgage interest rate in means tested benefits at 6.08% for all claimants. It was announced in the recent Pre Budget Report that this interest rate will remain at 6.08% for the present time.
Young Person's Guarantee
Budget 2009 announced the Young Person's Guarantee under which all young people between 18-24 would be guaranteed a place in work or training after 12 months on Job Seekers Allowance. However, the Government brought this forward so that from January 2010 the guarantee will be offered from the six month point of a Job Seekers Allowance claim.
The guarantee promises one of the following:
An offer of a job (either a new job through the future jobs fund or an existing job in a key employment sector)
Work focused training
A place on a community task force
For more information, visit hmrc.gov.uk