Why the 31st October 2023 and not 31st January 2024?
Although the very final deadline to complete your 2022/23 tax return is 31st January 2024, that is also the same day that you have to make payment of any tax that you owe for last year.
This may also include payments on account for next year, that you may not have thought about or budgeted for.
Therefore, it can be very beneficial to treat the 31st October 2023 as the final deadline to complete your 2022/23 personal tax return. (This is actually the paper tax return deadline, any paper returns submitted after 31st October will result in an instant £100 fine.)
Calculating the tax due by 31st January 2024 in advance
If you submit your tax return in October 2023, you will still have 3 months to raise the funds to settle your upcoming tax liability.
Leaving things until January 2024 could result in a shock if you find out you have a tax liability and only a few days to raise the funds.
Sadly, with the frozen allowances and high inflation, people are finding that their tax liabilities are increasing.
Payments on Account for 2023/24
Many people forget, or don’t know about, payments on account.
If your taxability for 2022/23 is over £1,000 then you may have to make additional in-advance payments towards next year’s tax liability.
These are calculated at 50% of the previous year’s liability and are payable by 31st January and 31st July 2024. These are on top of the amount due in January 2024 for last year.
The danger in completing a tax return later in the year is that not only do you find out that you have an unexpected large tax payment for last year, you also have to pay 50% more on top towards next year’s tax liability…
and may only have a few days to make payment in order to avoid interest charges (currently 7.75%), as well as surcharges (currently 5%) should the amount be unpaid after one month.
Being able to seek assistance with your tax
Should you be looking for an accountant or tax adviser to help you with your tax return for last year, they may not be able to help you if you leave things until the last minute.
As we approach the final deadline in January, they may not have capacity to help you complete your return in time. Indeed, some advisers do not take on new clients late in the year. Some others may charge perhaps double their normal fees if they are able to help due to timescales.
It is therefore important to seek assistance as soon as possible.
Possibly Paying Through Your Tax Code
If you have ongoing PAYE income and a liability for last year, you may be able to have the liability collected interest-free by monthly deductions in your tax code from April 2024 to March 2025.
However, in order to be able to do this one of the conditions is that your tax return has to have been processed by 31st December 2023.
In order to meet this deadline, your return must have been completed at least some weeks before due to the holiday period and office closures for the holidays.
Possibly spreading out tax payments
One other option that may be available is setting up a payment plan with HMRC for last year’s tax liability.
However, in order to take advantage of this your return will have to have been completed and the tax calculated in advance.
Early access to refunds
If you are entitled to a tax refund, filing early means you’ll receive your refund sooner. This can be a significant financial boost, especially if you have plans for the extra funds. By filing by October 31st, you’ll avoid unnecessary delays in receiving your refund, allowing you to put the money to good use.
If you wait until close to the 31st January final deadline, there will be a large amount of returns being processed and you could have to wait perhaps weeks or months until you finally receive the money you are owed.
Enjoying a stress-free holiday season
Perhaps the most compelling reason to file your taxes by October 31st is reduced stress you’ll experience during the year-end holiday season. Instead of worrying about tax deadlines and financial obligations, you can focus on enjoying quality time with loved ones and making the most of the festive season.
If you wait until the holidays to work on your return, you will find that many advisers are closed over the holidays so you won’t be able to seek assistance if any queries come up. This will push things back until January, when there could be further delays as they will be working through work from the closure in date order.
Seek help early
If you have any queries regarding tax, please do make contact with me as soon as possible. There are many advantages as above, and getting things finalised early means you can relax over the holidays. There is no charge for the initial short email consultation.