Whether you're a business paying Corporation Tax or a self-employed individual filing a Self Assessment, you have a tax liability on the money that you earn in each financial year.
The amount of tax you owe HMRC may vary from one tax year to the next, but it's a good idea to keep on top of it as you can face penalties and interest if you pay the wrong tax amount within a tax year.
It's good to keep track of important dates in the tax calendar so that you can keep on top of your payments and tax returns. This includes knowing when the tax year ends so that you can meet the necessary HMRC deadlines.
In this article, we'll take a look at when the tax year begins and when it will end and what this means for you. We'll also walk you through some of the things you need to do or consider as we near the end of the current tax year.
The tax year begins on the 6th April and ends on the 5th April of the following year. The upcoming end of the tax year is Tuesday 5th April 2022. In the case of the tax year 2022/2023, the tax year begins on Wednesday 6th April 2022 and ends Wednesday 5th April 2023.
You must pay HMRC any tax that you owe before the deadline, otherwise, you may be faced with penalties and interest on top of what you already owe.
Continue reading to find out how you can prepare for the end of the tax year and the other important deadlines throughout the tax year for both self-employed and employed individuals.
What should I do before the tax year ends?
It's important that you file a Self Assessment tax return before the end of the tax year ends if you are self-employed. The information in the tax return, including your untaxed and work-related expenses, lets HMRC how much tax you should pay.
It's important that this tax return is filed before the tax year ends because HMRC may issue you with penalties and interest on whatever you owe and have not paid.
There are many other things that you should do to maximise your allowances before the end of the tax year too. This includes the consideration of your ISA allowance (if you have an Individual Savings Account).
You don't have to pay Income Tax, Dividend Tax or Capital Gains Tax (CGT) on cash or investments that have made gains in an ISA. In the tax year 2021/2022, there was a limit of £20,000 that could be paid into an ISA. This investment could be split between various avenues, including cash ISAs, innovative finance ISAs, stocks and shares ISAs and lifetime ISAs.
It's also worth thinking about topping up your pension before the tax year ends. You will receive greater tax relief on your pension if you pay more Income Tax. As a basic-rate taxpayer, you will be given £1,000 by the taxman for every £800 that you pay into your pension pot.
The majority of people are given tax relief on £40,000 of their pension contributions each year. Alternatively, this could also be 100% of your income, but this will depend on which amount is lower. This amount will also be tapered if you earn over £200,000 and your earnings and pension contributions exceed £240,000.
The CGT allowance of 2021/2022 was £12,300, which is staying the same into the tax year 2022/2023. This amount covers any shares and investments that you sell, along with property and any other assets that you may have.
How much Income Tax do I have to pay?
Basic-rate taxpayers spend about a third of their total income on various taxes. National Insurance and PAYE are around 20% of your income as a basic-rate taxpayer. Following these deductions, the remaining tax goes towards indirect taxes such as VAT and Council Tax.
You can use our Income Tax calculator to estimate how much tax and National Insurance contributions you will have to pay for the current tax year. It will tell you the take-home pay and allows you to include any other deductions such as student loan payments or pension contributions.
Income Tax is determined by how much you earn, whether you are employed or self-employed. The basic taxable allowance for the tax year 2022/2023 is £12,570. This means that your taxable income is however much you earn above £12,570, excluding other eligible reliefs that you may qualify for.
England, Wales, and Northern Ireland have the same tax bands for Income Tax. The Employee Personal Allowance amount in Northern Ireland, Wales and England for 2022/2023 is £12,570 per year, whilst the basic tax rate is 20% of earnings above the PAYE threshold of £37,700.
All three countries have a higher tax rate of 40% on income that falls between £37,701 to £150,000 in the tax year. This rate moves up to 45% on annual income which is higher than £150,000.
Scotland has slightly different Income Tax rates. There are more tax bands in Scotland which means that the thresholds vary. Although Wales has the same tax bands as Northern Ireland and England at the moment, they are subject to change as the Welsh government has the power to adjust them.
You may also be taxed on benefits that you are given at your place of work, such as private healthcare and a company car. Any income that you are paid by your employer will have a PAYE deduction before you receive it, which means that you don't have to worry about reporting this yourself. Self-employed individuals must file a Self Assessment tax return to make a payment for Income Tax.
It's important that your tax return is accurate otherwise you may find that you have under or overpaid tax. Underpaying tax means that you will have to pay tax in a second payment. Employers, on the other hand, will check that you have paid the correct amount for PAYE by referring to your tax code.
Each employee is given a tax code, which helps their employer and pension provider know how much Income Tax they should be paying. Your tax code will change depending on your job and salary. This means that you can pay a different amount in Income Tax from one financial year to the next.
In some circumstances, you may be put on an emergency tax code, such as changing a job in the middle of the tax year. In this instance, you will likely be paying too much tax, which will be paid back to you after the financial year has ended.
When do I make Self Assessment payments and file my tax return?
You must register for Self Assessment by 5 October. Following this, the deadline for a paper tax return is midnight on 31 October. The deadline for online Self Assessment submissions is midnight on 31 January, although you have until 28 February to submit it before you will be faced with a late penalty.
All tax must be paid by 31 January, but individuals who have a reasonable excuse have until 1 April to pay the tax that they owe. An accepted excuse could be one of the following:
- Death of a close relative
- Unexpected hospital admission
- Computer or software malfunction
- Theft or natural disaster
- Postal delays
These reasons are only accepted if they prevented you from fulfilling your tax obligation, despite reasonable care on your part. You must notify HMRC about any of these issues so that they can arrange an extension on your Self Assessment tax return.
Individuals who must register and file a Self Assessment include those that are self-employed or sole traders, as well as those registering as a partner or on behalf of a partnership. You may also have to file a Self Assessment if you make rental income from letting out property.
Another reason that you may have to register for Self Assessment is to prove that you are self-employed when applying for Maternity Allowance or tax-free childcare. You may also have to register if you or your partner's annual income is over £50,000, as you may need to send a return and pay the High Income Child Benefit Charge.
What penalties will I face with a late Self Assessment tax return?
You will be issued with a penalty if you submit a late tax return without a reasonable excuse and don't pay the tax that you owe. The initial penalty is £100 if your tax return is over three months late. This amount will rise if you still don't pay the tax return, as well as interest on top of the initial amount that you owe.
If you think you have a reasonable excuse, you can dispute the late penalty charge nad any interest that may accrue. HMRC will usually send you a letter informing you of the late payment and penalty, which will be accompanied by a form that you can fill out to oppose the penalty.
You will need to include the date that the penalty was issued, along with the date that you filed your Self Assessment (if applicable) and your reasonable excuse as to why you failed to make the required payment on time. HMRC will give you another date to submit your tax payment if they accept your reason. In the instance that HMRC doesn't accept your reason, you will be expected to pay back the money you know as soon as possible, along with the penalty fees and any interest you may have accrued.
Can I claim a tax refund for overpaid tax?
Sometimes you may find that you have overpaid on your tax for a previous tax year. This could be because you were on an emergency tax code after changing jobs or because your Self Assessment contained inaccurate information.
You can file a tax reclaim for the tax years 2017/2018, 2018/2019, 2019/2020 and 2020-21, as well as the last tax year 2021/2022. HMRC will ask what you think you paid too much on, such as your pay on your current job, previous job or pension. Other areas that you may have overpaid tax include a redundancy payment, foreign income or interest from savings or PPI (Payment Protection Insurance).
HMRC will send you a P800 if they think that you have paid too much tax in the financial year. This letter will usually tell you how you can claim back the tax you overpaid. If you complete the form online, you can expect a refund within five working days. However, if you do not make the claim, HMRC will send you a cheque in the post within 21 working days. This cheque should arrive within six weeks of the P800 first being issued.
Individuals who are owed more than one tax refund will receive a single cheque for the whole amount. This will arrive within 14 days of the date stated on your P800.
The tax year, otherwise known as the financial year, runs from 6 April to 5 April each year. Any income that you make during this period is subject to Income Tax, which your employer will deduct from your pay if you are in employment. You will need to register and file Self Assessment if you are self-employed or a sole trader.
The deadline for registering for Self Assessment is 5 October and the deadline for submitting a paper tax return is 31 October. All tax must be paid by 31 January, unless there are exceptional circumstances. In this scenario, you must inform HMRC as soon as possible so that you aren't faced with late penalties and interest.
In some cases, you may end up overpaying or underpaying tax. This information will be included in a P800, which HMRC will send to you after the previous tax year has ended. The P800 should be sent to you by November, after which time you will be expected to pay back any tax that you owe. Alternatively, you may be sent a cheque with the overpaid tax amount, or it will be added to your payslip.