How will the coronavirus pandemic impact your tax return in 2022?
With the self assessment deadline for the 2020/21 tax year fast approaching, our partner TaxScouts takes you through the key deadlines as well as how your tax return may be impacted by the COVID19 pandemic.
What are this year’s important self assessment dates and deadlines?
The deadline for submitting your 2020/21 tax return online is 31st January 2022. This is also the deadline to pay the tax that you owe. The tax year for 2020/21 ran between 6th April 2020 to 5th April 2021, so make sure to have all your income and expenses information for that time period ready before you start your self assessment.
If you haven’t started thinking about your tax return, now is the time. Remember, you will need to declare details of all the income you have earned during the 2020/21 tax year, including income that has already been taxed under PAYE.
How will the COVID19 pandemic affect your tax return?
There are some specific circumstances related to the pandemic that may affect your 2020/21 tax return. They include:
- Claiming a SEISS government grant
- Taking on additional work due to furlough or loss of income
- Working from home
- Incurring COVID-related expenses, such as buying PPE
- Receiving financial support abroad
If you claimed an SEISS government grant, it will need to be included on your tax return alongside all your other income. You will be required to pay tax on your SEISS grant, which may mean your tax bill for 2020/21 is higher than you expect
Additional work due to furlough
Some people may have started freelancing as a result of lost income or furlough related to the pandemic. If you have earned income of more than £1,000 from freelance or contracting work during the 2020/21 tax year then you will need to submit a self assessment tax return, even if you also paid PAYE tax. You may need a P60 or P11D to get details of the tax you have already paid.
Working from home
Self-employed freelancers can claim the Home Office Allowance. This is a flat tax rate that you can claim, depending on how many hours you worked from your home each month. For many people this will have increased during the 2020/21 tax year.
Hours of home business use per month
Flat rate that you can claim
25 – 50 hours
£10 per month
51 – 100 hours
£18 per month
More than 101 hours
£26 per month
This allowance does not cover home working expenses, such as telephone or internet bills. These will be covered separately on the business expenses portion of your tax return.
Many freelance workers will have paid out additional expenses in 2020/21 for PPE or other equipment required to better protect them and their clients during the pandemic. Freelancers working in the healthcare or beauty industries may be particularly affected. These expenses are deductible against your income and should help to reduce your overall 2020/21 tax bill. Remember to add them up and ensure they are included.
Expat financial support
If you are an expat who lives outside of the UK but is required to complete a UK self assessment and you claimed financial support from the country you live in during the pandemic, you will need to declare this on your tax return. HMRC may deem this as income. This will result in your tax bill being higher than you expect.
Finally, the ongoing effects of the pandemic on tax returns is that Covid related absences may delay the processing of tax rebates. Another reason to get your tax return filed as soon as possible.
6th January 2022