When hitting the 31 January deadline is taxing

For many of us the festive period is a time for celebration and relaxation but, for some, it marks that yearly sense of impending doom that submitting a Self Assessment tax return brings. It's rather like being at school. Some of us will always get our homework done in good time, while others will be up the night before to get that essay written.

Tax payers can complete their Self Assessment for the previous tax year from as early as 6 April but many choose to wait until after Christmas to fill it in.

If you do find you are spending part of the Christmas period sorting out your receipts, then you can blame Prime Minister William Pitt the Younger. He introduced Income Tax – the first tax in British history to be levied directly on people's earnings – back in 1799 as a temporary measure to cover the cost of the Napoleonic Wars.

Today, it remains a temporary tax, which expires on April 5 each year, and has to be renewed as a provision in the annual Finance Bill. The Provisional Collection of Taxes Act 1913 permits the Government to continue to collect Income Tax for up to four months after the expiry of the measure, until the Finance Bill becomes law.

Income Tax was formally repealed in 1816, a year after the Battle of Waterloo, but it was reintroduced in 1842 by Sir Robert Peel to deal with a massive public deficit. At this time, it was levied only on the very rich, and it remained so for many years. By 1930, 10 million Britons were liable for Income Tax and it was extended to a larger proportion of the population in 1945, to pay for the Second World War effort.

Last year, more than 11 million individuals completed a 2016 to 2017 Self Assessment tax return, with 10.7 million completing on time. There were 4,852,744 customers who filed in January 2018 (44.8% of the total), and 758,707 on 31 January, the deadline day. Last year, a record 93% of people did their return online.

As accountants, we would always suggest that people plan ahead and give themselves the time to find our how much tax they need to pay and pay the money owed by the deadline – even if that simply takes away some of the stress around this holiday period.

“The deadline for completing Self Assessment tax returns may be some days away, yet many of us wait until January to start the process. Time flies once the festive period is underway, yet the 'niggle' to file your tax return remains,” says Angela MacDonald, HMRC's Director General for Customer Services. “We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time. Let's beat that niggle.”

If you miss the deadline of 31 January, you'll be charged a penalty of £100 and if your tax return is over three months late, with notice, you can be charged daily penalties of £10 a day. There are more penalties at six months, partly tax geared. You'll also be charged interest on late tax payments and surcharges of 5% of the tax if it remains unpaid at the end of February, another 5% after six months and so it goes on.

If you've got any questions about getting your accounts in order ahead of the deadline, please do call us on: 01892 526417.