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24 Jan 2022

Tax returns to take a combined 25 million hours to complete - have you filed yours yet?

Which? finds some people spend more than seven hours on their tax return

Millions of people haven't yet filed their 2020-21 tax return, with many expected to leave the task until 31 January and beyond since HMRC announced it would waive late filing fees during February.

A Which? survey found that self-assessors are likely to spend a total of 25 million hours working on their tax returns this year, based on the average of 132 minutes that respondents told us they spent on the task, and the estimated number of people in the UK who file their own tax return.

While two in five people told us they've already budgeted for the expense, one in five are planning to dip into their savings. Another one in five said they hadn't thought about it yet.

Here, Which? explains what you need to know about filing your tax return, and how gaps in people's tax knowledge could mean they end up paying the wrong amount of tax.

How long does it take to submit a tax return?

According to our survey, the average time it takes to complete a tax return is 2 hours and 12 minutes.

While a quarter of people say it takes them less than an hour, it can take much longer. In fact, 4% of people said their tax return took five to seven hours to complete, while another 4% said the process took more than seven hours.

If you usually find the tax return process gruelling, we'd suggest getting all of the paperwork and figures you'll need in front of you before you start, so you don't have to keep pausing to hunt down information.

What you'll need will depend on your circumstances, but it's likely to include your UTR number, your National Insurance number, a P60 and/or P45, bank statements, invoices and student loan statements.

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What happens if your tax return is late?

The official deadline for 2020-21 returns is still 31 January 2022, and you should do everything you can to get your return to HMRC by this date.

However, if you're unable to hit the deadline, HMRC will waive the £100 late filing penalty throughout February. That means as long as you file your return by midnight on 28 February, you won't receive a penalty - but you will from 1 March.

After this date, the late filing penalty structure will work as usual:

  • One day late: £100 fine
  • Up to three months late: £10 fine each day, capped at 90 days - plus the first £100 fine
  • Six months late: An additional £300, or 5% of the tax due - whichever is larger
  • 12 months late: An additional £300, or 5% of the tax due - whichever is larger.

What if your tax payment is late?

The deadline to pay the tax you owe is also 31 January. While HMRC has waived the 5% late payment fine until 1 April 2022, it will still charge 2.75% interest on unpaid tax from 1 February onwards.

If you're unable to pay your tax bill, you can set up what's known as a Time to Pay arrangement, which allows you to pay what you owe in instalments. You can do this online using your Government Gateway account if you meet the following critera:

  • you owe less than £30,000
  • you intend to pay what you owe over the next 12 months
  • you've submitted your 2020-21 tax return
  • you don't have any other outstanding funds with HMRC.

If you can't set up a Time to Pay arrangement online, you can call the Self Assessment Payment Helpline on 0300 200 3822.

  • In our survey, one in six people said they planned to use Time to Pay arrangement to pay the tax they owe for 2020-21.

If you haven't paid your tax bill, or set up a Time to Pay arrangement by 1 April, the usual late payment charges will apply:

  • On 2 April: A charge equal to 5% of outstanding tax
  • After six months (31 July): Another 5% charge
  • After 12 months (31 January 2023): Another 5% charge.

How does your tax knowledge compare?

Which? posed seven true or false statements about tax rules to 4,000 survey respondents - could you get them all right?

The question on backdating the marriage allowance caused the most confusion among survey respondents: half said that they didn't know whether it was true or false.

In fairness, it was a bit of a sneaky question. While it is possible for eligible couples to backdate a marriage allowance claim, you can only do this for the previous four tax years, not five. If you can backdate your claim, you could get a tax rebate of up to £1,220.

We also saw some confusion around the tax you pay on your state pension. The state pension is paid gross, without any tax deducted, but you might have tax to pay if your total income from all sources is greater than your tax-free allowance.

This is usually deducted via PAYE from any private pension or earnings you might have.

Don't forget to include SEISS payments

Our survey found that of those who had received a self-employment income support scheme (SEISS) grant during the 2020-21 tax year, one in eight people said they were not aware these grants were taxable and had to be declared on their tax return.

SEISS grants are subject to income tax and self-employed National Insurance, and therefore must be declared as part of your income on your tax return. There's a specific section for this income, on a page called 'Other tax adjustments for your business trading name'.

Try the Which? tax calculator

If you haven't submitted your 2020-21 tax return yet, the Which? tax calculator can help you tot up your tax bill, and suggests expenses you might have forgotten.

When you're ready, the online tool can even submit your return directly to HMRC.

Try it for yourself at which.co.uk/money/tax-calculator.