Self-assessment deadline enters the final straight

The self-assessment deadline for the 2020/21 tax year is creeping up on us once again, and there's a significant elephant in the room this year.

On average across the five windows, 2.08 million taxpayers claimed emergency support via the self-employed income support scheme (SEISS).

All of these grants count towards claimants' taxable income for the pandemic-affected 2020/21 tax year and must be reported on or before midnight on 31 January 2022.

Most self-employed taxpayers have already filed tax returns for the previous tax year, although a handful use the festive period to do it.

Last year, around 31,400 taxpayers completed their 2019/20 tax returns between Christmas Eve and Boxing Day.

That peaked with 20,200 returns filed on Christmas Eve, including 2,892 in the hour before midnight.

Around 2,700 were filed on Christmas Day 2020, followed by 8,500 on Boxing Day. Many others simply leave it right up to the last minute.

Reporting the SEISS grant

sUnincorporated businesses with annual trading profits of £50,000 or less qualified for the first three taxable grants via the SEISS in 2020/21.

Every eligible business could claim up to £21,570 in total from the three SEISS grants available in 2020/21.

Any SEISS grants claimed in the tax year will be added to other taxable income before being assessed for income tax on the excess above £12,500.

These need to be included in the ‘profits from self-employment' for 2020/21, and will be subject to income tax and Class 4 NICs.

For Class 2 NICs and the small-profits threshold, use a separate box in the ‘other tax adjustments' section to disclose the amount of SEISS received.

Records to use

Self-employed taxpayers will need the SEISS claim reference number, plus records of the amounts they claimed from any or all of the three grants.

For the first two grants, evidence of how the pandemic impacted on a business's trading profits should be disclosed.

Anything from records of fewer invoices to positive COVID-19 tests can demonstrate to HMRC how a business was affected for the third grant.

On top of that, HMRC advises keeping records of any income from sales or receipts from business expenses incurred in 2020/21.

Records of any personal income, such as from investments, savings, pensions, or rental proceeds, should also be declared in a tax return.

Panic for first-timers?

Anyone filling out a tax return for the first time could miss the 31 January 2022 deadline, according to a report in The Times.

Some 407,510 startups were created during the 2020/21 tax year, despite the challenges presented by the COVID-19 pandemic.

Those who are unincorporated had to register for self-assessment on or before midnight on 5 October 2021.

Under normal circumstances, HMRC sends out unique 10-digit unique taxpayer reference codes in the post, followed by activation codes.

At the time of writing, thousands of taxpayers face missing the 2020/21 deadline because of huge delays in processing requests for the codes.

It remains to be seen whether or not the tax authority will give these individuals more time to comply with their self-assessment obligations.

We handle every aspect of self-assessment.