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The Financial Year – what is it and why do we have it?
The financial year here in the UK is the 5th April. We have it, so that individuals/companies etc. (and it’s the same for everyone), can pay their taxes for the previous year and we can all benefit from the governments infinite wisdom, as to how they then spend it.
This “strange” date emanates from the Doomsday period! Let us explain. Tax and the the taxman was a new concept back in those days. The King of England decided that if we were literally, to come out of the dark ages, we all had to pay a bit to make that happen. It was agreed that anyone with a property should therefore pay tax. When he set out collecting the taxes from property to property, naturally he had a big bag of cash at the end of the day. Now, the time of year when he started this was the 1st January – and why not, it’s the beginning of the year, but unfortunately, it gets dark early in January and more often than not, before he had a chance to get to the bank, he was mugged…daily! The King at the time was eager to get his cash reserves in, the taxman too, as he was also getting a good hiding most days, so the King decided the earliest part of the year when the days were longer and therefore much safer, was the first week in April and that’s why we have it! As with many traditions in this country, this is one we have stuck with ever since.
6th of April
5th of April
So, to refresh, the 5th April is the end of the financial (also known as tax year), year and therefore the 6th April is the beginning of the new financial year! Simple!
What this means to you as an individual is that you can assess whether you have paid too much tax for the year, or too little. If it’s too little, then you have to either pay your tax after this date (they do give you a few months to cough up). This will certainly be the case if you are Self-Employed etc, But most people in the UK will have already paid their taxes throughout the year, as most people fall under the remit of PAYE or Pay As You Earn. This system means what it says, you pay your tax as you earn your money.
Your employer will deal with all the shenanigans for you and give you a payslip each week/month, showing what you earned and what large chunk of it, he’s taken away to pass onto the taxman (obviously all these rates of taxes and tax free parts of your pay are worked out in the annual Budget) and therefore you don’t actually need to make a payment after the end of the tax year, but it may well be worth your while checking to see if you have OVER-paid your taxes and that’s where we would come in – we can check your tax every year end and let you know if you are owed a refund- it’s quite common, in fact a third of all UK taxpayers are due a Tax Refund.
There are many reasons that you could be due a refund, here are the common ones:
- You have been put on an incorrect tax code- usually human error in involved, by either your employer or the taxman.
- You haven’t worked a complete tax year.
- You haven’t or weren’t aware that you could claim expenses to set against your earning, which results in a Tax Refund, for example you can claim an allowance (expense), for working from home (£6 per week), something we have all had to do during this pandemic.
- Petrol expenses or Public Transport costs if you are a care worker moving around all day seeing your patients.
- Estate agents showing clients house for sale/rent can claim a business mileage expense.
Apply with us under the PAYE Tax Refunds application and we will let you know if you are due a refund. Alternatively, see our Tax Calculator page to see if you are due a refund.
The UK Tax Year 2020-2021 – Dates to Remember to Avoid Penalties
Important Dates In The UK Financial Year UPDATED – 16th July 2021: As mentioned, the UK Tax Year runs from 6 April to 5 April of the next year. Within this period, all of your income, whether earned or remitted in the UK, may be subject to tax. Whether you owe tax or not, there are important dates that you need to always keep in mind. The new financial year begins on the 6th April 2021.- Therefore, you can apply for a tax refund after the 5th April each tax year, or if you have finished working for that tax year, i.e. if you are leaving or have left the UK. .
Click the banner below to find out if you are due a refund or use our UK tax refund calculator.
Key Dates for the UK Tax Year 2020-2021
The current tax year is 2021-2022 which started on April 6th 2021. It is the start of the UK Financial Year. You can claim up to 4 years previous tax if you have not claimed before. The tax years in the UK you can claim are: 2017-18, 2018-19, 2019-20 and 2020-21 and of course you can claim this current tax year (2021-22), if you are not going to be working in the UK for the rest of the tax year.
Important UK tax date for Self Employed people and freelance professionals – October 5th
You must register for Self Assessment tax return by the 5th of October, which follows the end of a tax year that you need to send a tax return for. For the 2020/21 tax year, for instance, you must have registered by 5 October 2021. Since it usually takes a few weekss for the registration process to complete, starting the process by 5 October will give you time to submit your self assessment tax return online by the 31st January 2022 deadline for online return.
Important UK tax date for UK Self Assessments: December 30th
If you are unfortunate enough to land a tax bill, then you may be eligible to pay your bill through your PAYE tax code (if you are an employee, so not self-employed), but make sure you file your online return by 30 December. HMRC will then automatically collect the tax you owe from your PAYE coding in the following tax year- and if you’re really cheeky/hard-up, you can ask the tax man to code it out over the following three tax years!
Important UK tax date for Self Assessment tax filing: January 31st
If you file your self assessment tax online, the date to remember for paying your UK tax and filing your tax return is the following 31st of January. Online tax returns must be completed and submitted to HMRC by the 31st January each year. For the 2020/21 tax year, tax return must be filed online by 31 January 2022. Before midnight of the 31st January, you must pay the tax you owe, which is basically the same date as when you file your online tax return. It’s a good idea to file your Self Assessment tax return soon after April 5th to allow you sufficient time to pay what you owe to HMRC.
End of the UK Tax Year is April 5th
The end of the UK Financial Year is April 5th. If you have to file a Tax Return (also known as Self-Assessment) – which is different to applying for a Tax Refund – then you will need to file your return before the deadline of 31st January the following year. Otherwise you will incur penalty fines for late filing. Filing for a Tax Refund can be done at any time.
With regards to filing a Tax Return, if and this is only if you owe HMRC money and it’s less than £3,000, you can request that HMRC collect it through your following years tax coding, rather than having to stump the whole lot up at once..
So, back to Tax Returns and when they need to be filed. There are basically two key dates you should remember – 31 October and 31 January, depending on whether or not you file on paper or online, respectively. Of course, it is still possible to forget about filing a tax return on time. When this happens, you must be prepared to face the penalties.
- Even if you do not owe any, tax you will be charged a penalty. As long as you receive a letter (now usually an email), from HMRC telling you to file your tax return, you must comply even if you do not owe any tax.
- You will be charged a penalty of £100 that is non-refundable.
- You will be charged a penalty of £10 per day, up to a maximum of £900, if you file a tax return 3 months late.
- You will be charged £300 or 5% of the tax you owe, whichever is greater, if you file a tax return 6 months late.
- You will be charged another £300 or 5% of the tax owed, whichever is greater, if you file a tax return 12 months late.
Then, there are exceptional circumstances where you will be charged a penalty of up to 100% of the tax due. Since there are also penalties when you fail to pay tax on time, it is best to set a reminder for these dates. Better yet, work with tax experts who will remind you what you must do to avoid penalties. Got any questions? Get in contact with our UK based tax agents.
Do You Need to Submit a Self Assessment Tax Return?
If you are self-employed, a Higher Rate taxpayer, so income over £50272 (for 21/22), a Director, or have any other income which can not be taxed at source, so for example Income from property, then you have to file a Tax Return every year – this is also known as Self-Assessment.
Taxback.co.uk are UK based tax agents who can assist you with filing your Self-Assessment tax returns. To start your Self-Assessment return you can use our online application form. Once completed, one of our team will be in touch to go through the stages of preparing a draft of your Tax Return. Once everything is agreed and in its proper place, we will then submit/file your return with HMRC.