Self assessment tax returns and cash flow
As people get into the Christmas spirit, self-assessment taxpayers are facing the doom and gloom of 31st January 2019 tax bill but a cash flow benefit can be achieved by getting your tax return in early, says Paul Haywood-Schiefer, tax manager at Blick Rothenberg
7 Dec 2018
For those completing tax returns under self-assessment, there is always a tendency to leave everything to the last minute, but by getting the return submitted to HMRC by the 30th December, those with liabilities under £3,000 might be able to get this collected through their tax code and spread the payment, rather than paying a lump sum in January.
There are some basic conditions for this to apply, which are that the return is filed by 30 December 2018; the tax due is below £3,000; tax is already being paid through PAYE either as an employee or on a pension; and that the person's income through PAYE is sufficient to collect the tax without paying over more than 50% of your PAYE income in tax or paying twice as much tax as you normally do.
The real benefit with this is the spreading of the tax payment. January can be a tough month anyway with people spending on their credit cards in the run up to Christmas.
They are also often paid early, meaning they have almost six weeks till their next pay cheque. The opportunity to spread tax seamlessly over 12 months would be a major benefit to many.
There is an important thing to remember with this though. If people do this, then when they come to complete their tax return next year, they will need to include the amount of tax that was collected through their tax code on that form.
Otherwise the tax calculation will probably show a repayment, and they might think next year's Christmas has come early.
About the author
Paul Haywood-Schiefer is a tax manager at Blick Rothenberg