Taxpayers urged to meet January tax deadline to avoid penalties
Taxpayers urged to meet January tax deadline to avoid penalties
With the 31 January deadline to submit a tax return for the 24-25 tax year less than a month away, BDO is urging taxpayers to get their skates on to avoid a late filing penalty.
Avoiding a last-minute rush at the end of January by completing self-assessment sooner rather than later will also mean filers can carefully ensure all income, gains and reliefs have been accounted for. This is especially important if this is your first time because you’ll need to register for self-assessment with HMRC so it can issue you with a Unique Taxpayer Reference number – which can take a up to 15 days to come through by post.
It’s important to submit tax returns on or before 31 January to avoid an automatic £100 late filing penalty. After 3 months, additional daily penalties of £10 per day apply up to a maximum of £900, with further penalties kicking in after six and 12 months.
Late payments can also result in late payment interest being charged – this is four percentage points higher than the Bank of England base rates so costs can rise steeply.
However, there is help to spread payments in the form of a Time to Pay arrangement – where affordable monthly payments can be set up online if you owe under £30,000. For higher amounts, taxpayers will need to speak directly with HMRC.
Those who are unsure if they need to file a Self Assessment tax return can check on the gov.uk website at: Check if you need to send a Self Assessment tax return - GOV.UK
Commenting ahead of the 31 January 2026 deadline, BDO tax partner, Elsa Littlewood, said:
“As the new year brings the end of January self-assessment deadline into full view, there is still time to prioritise it for those who were not among the 37,435 who submitted returns between Christmas Eve and Boxing Day, or indeed the millions who have already completed their returns.
“With many people earning extra income during 2024-25 – perhaps from side-hustles, crypto assets or overseas property rentals – some may find themselves completing self-assessment for the first time this year. Taking action in advance of the deadline will help to alleviate any last-minute stress at the end of the month and avoid penalties for late completion. For those who may struggle to pay their tax bill in full, starting early also gives you time to arrange an affordable payments schedule, through Time-To-Pay, if needed.”
BDO has the following tips and reminders to help those still to complete self-assessment:
Don’t forget to claim tax relief on pension contributions
If you make personal pension contributions, you are entitled to relief at your marginal rate of tax. If you pay contributions directly to a personal pension, you will get basic rate tax relief at source. However, if you are a higher rate or a top rate taxpayer, you’ll need to claim the additional 20% or 25% through your tax return. And if you are a sole trader or in a partnership you will need to claim all your pension tax relief through your tax return. So claim relief for pension contributions made during the tax year from 6 April 2024 to 5 April 2025.
Consider the High Income Child Benefit Charge
In the 2024-25 tax year, the earning threshold for the HICBC rose to £60K a year. For those with total taxable income between £60K and £80K, the HICBC will equal one per cent for every £200 of income that exceeds £60K. If you are close to the lower threshold, it might be worth considering making pension contributions for the current tax year before 5 April 2026 to take your taxable income below the threshold for 2025/26. If the HICBC is the only reason for your tax return, you can choose to pay this via PAYE – but note that if you opt for this for 2024/25 and 2025/26 you may end up paying for both years through your 2026/27 tax code.
Keep your personal allowance and entitlement to Tax-Free Childcare
You can get up to up to £2,000 a year for each of your children to help with the costs of childcare. If you earn above £100K, by just £1, you lose the eligibility for tax-free childcare, and your personal tax allowance is also reduced – although this is tapered away. However, if someone with two children on a salary of £105K has made a £5K gross pension contribution, they will retain the right to £4K in free childcare and make a tax saving of £2,000*.
Claim tax relief on charitable donations
If you have donated to a UK charity using gift aid, the Government tops up the donation giving the basic rate tax relief due on it to the charity. However, higher and additional rate taxpayers can also claim the difference between their top tax rate (either 40% or 45%) and the basic rate (20%) on the total (gross) value of a donation made. Don’t forget to claim for both regular donations as well as one-off gifts. Gift aid donations also work to re-instate your entitlement to the personal allowance, where your gross income is over £100k. You can claim relief for any charitable donations made during the 2024/25 tax year as well as elect to carry back any made in this tax year up to the date you file your tax return. So, if you wait to file until the deadline, you can claim relief for gift aid donations made between 6 April 2024 to 31 January 2026.
Take care with capital gains – the tax rate changed mid-way through 2024/25!
From the date of the Autumn Budget in 2024 (30 October), the main rates of CGT applying to disposals of assets (apart from residential property and carried interest), increased from:
- 10% to 18% for basic rate taxpayers; and
- 20% to 24% for higher rate taxpayers.
So, you will need to split your gains made at different dates to calculate the right rate of tax. Make sure you allocate any losses and the annual exemption to the gains realised on or after 30 October so you get the most tax relief. HMRC’s self-assessment software cannot do this: it just calculates tax based on the pre-Budget rates. However, there is an adjustment box (51) so that you can ensure you pay the correct amount of tax – but, don’t forget to explain your calculations on the form (using box 54). HMRC has made a specific “adjustment calculator” available here.
Declare all your rental income and gains from property sales
HMRC is homing in on residential landlords who may not be paying the correct tax, so it’s important that you accurately declare all rental income received.
If you rent out a residential property, you must pay tax on the profit you make after deductions for ‘allowable expenses’, and make sure you also declare any profit from letting out holiday property, either in the UK or overseas. The only exceptions are where the profit is less than £1,000 each year. If you let a room in your home (for example to a lodger) you can claim tax relief of up to £7,500 as a deduction against the costs.
When you sell a residential property there is now a requirement to complete a specific land return and pay any tax due within 60 days. However, if you also complete a tax return, you still need to include the disposal on your tax return and include details of the payment reference for any tax you have already paid.
Report your foreign income
One common pitfall is the reporting of foreign income – for example, money from renting out a property abroad, interest earned in overseas accounts, or funds in an overseas trust or pension.
You might think that submitting a return in the jurisdiction where the income arises satisfies your UK obligations, but this isn’t the case.
If you are a UK tax resident, you will normally be subject to UK tax upon your worldwide income and assets.
Although foreign income or gains are automatically reported to HMRC under the Common Reporting Standard, you must still include them on your tax return but you can claim relief for foreign tax paid on these sources.
Don’t forget to declare earnings from your side-hustle
Where you earn over £1,000 from selling goods or services you may need to complete a tax return. HMRC have a tool to help you work out whether you need to file a return.
New rules which came into force from January 2024 require digital platforms to pass on information about their users’ income to HMRC. The first reports were delivered to HMRC before 31 January 2025. As a result, HMRC will have more accurate information for the full 2024-25 tax year with which to detect and tackle tax evasion.
Bank interest outside of ISAs
You may have exceeded the £500 savings allowance (or £1,000 for basic rate taxpayers) for the 2024-25 tax year. Make sure all interest is fully reported on your return. It is important to check the interest earned across all personal and joint accounts. Don’t forget that HMRC will receive reports on interest earned directly from your bank or building society.
Don’t forget your crypto gains
With 12% of UK adults now owning some kind of crypto asset according to FCA research, many people now need to declare their crypto gains on their tax returns. In simple terms, HMRC views the profit or loss made on the buying and selling or swapping (i.e. using to make a purchase or changing into a different crypto currency) of exchange tokens as within the charge to Capital Gains Tax. Amid concerns that many people may not be aware of their obligations, HMRC has launched a nudge campaign targeted at those who have failed to declare historic crypto tax liabilities.
It's also worth remembering that any crypto losses must be declared to HMRC in order to be carried forward and available to offset future gains.
ENDS
Note to editors
* A £5,000 pension contribution at 40% tax relief = £2,000
HMRC’s press release on the number of customers filing tax returns over the Christmas period this year: Festive filers sleigh their Self Assessment returns | HM Revenue & Customs (HMRC)
BDO UK operates in 17 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to the entrepreneurial, ambitious and growing mid-sized businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.
BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 169 countries and territories, with 95,000 people working out of 870 offices worldwide. It has revenues of US$11bn.
Contact
Lianne Rimmer
PR Manager
BDO UK
+44(0)7553 378456
lianne.rimmer@bdo.co.uk
Press office
media@bdo.co.uk
www.bdo.co.uk