The deadline for submitting 2020/21 tax returns is approaching quickly – it’s less than two months away! If you need to complete a personal tax return, submitting it before the end of January 2022 is vital to avoid a fine from the government. However, do you need to submit one? This article will explain whether or not umbrella company employees need to submit a personal tax return for the 2020/21 tax year.
Should umbrella company employees submit a personal tax return for the 2020/21 tax year?
If you use an umbrella company for your payroll, you may need to submit a personal tax return for the 2020/21 tax year – depending on your specific circumstances. Assuming your only source of income is working via a recruitment agency or for your client (which results in you being paid by an umbrella company), you do not need to submit a personal tax return because your tax affairs will be in order (Pay As You Earn – PAYE). However, suppose you have any additional sources of income. In that case, you may need to declare this and pay tax accordingly, and this is done by submitting a personal tax return (also referred to as a self-assessment tax return) for the current tax year (2020/21).
Who needs to submit a 2020/21 tax return?
You may need to submit a personal tax return for the 2020/21 tax year if any of the following applies to you during the 6th April 2020 and the 5th April 2021.
- You worked as a self-employed professional (excluding umbrella users because they are employees of their umbrella).
- You are a partner in a business.
- You are a religious minister.
- You are the trustee of an estate (or the executor).
- You are a company’s director, and some of your income isn’t taxed with Pay As You Earn.
- You have untaxed earnings, such as rental income from Buy to Let properties or interest payments that are not taxed.
- You are receiving yearly income from a trust or a settlement.
- You have foreign income, and UK tax is due on it.
- You have over £10,000 of earnings from savings and investments.
- You have an income of over £100,000 per year (before tax is due).
- You have an additional untaxed income of over £2,500 per year.
- You have child benefits, and your annual net income exceeds £50,000.
- You have a tax code that doesn’t account for all your tax affairs, and therefore you need to pay more tax through a personal tax return.
- You are looking to claim expenses from the tax year.
- You have capital gains that you need to declare.
For more information, please read the following article on the Low Incomes Tax Reform Group’s (LITRG) website: Do I need to complete a tax return?
Check if you need to submit a 2020/21 self-assessment tax return
The government has an online tool that is designed to help you identify whether or not you need to submit a self-assessment tax return for a specific tax year, and it’s well worth trying out!
How do you complete a 2020/21 tax return?
Typically, there are two options for those who need to submit a tax return. You can either do it yourself or approach an accountant to prepare your tax return for you. Both of these options have their pros and cons, and which solution you choose is entirely down to you.
Submitting a tax return can be done online via the government’s website. Before using the service, you need to register for Self-Assessment if you’re filing for the first time or didn’t do one last year. Once you have done this, you can use the Government Gateway to submit the relevant information. You do not need to do your tax return in one go. You are free to log in as and when you please to complete your tax return, assuming you do not pass the deadline, which is the 31st of January each year.
When an accountant prepares your tax return, it’s worth noting that you are the one who is required to sign it off. This means that if your accountant makes a mistake, they cannot be held liable. Instead, you will be the one who has to deal with the consequences. Therefore, it’s worth choosing a specialist accountant with plenty of tax return experience to ensure you don’t face any complications down the line!
The cost of a tax return service from a professional accountancy practice will vary. We recommend you shop around and see if any special offers are out there. For example, we noticed a well-known accountant offering tax returns from £150.00 (ex. VAT) during Black Friday 2021 – but we’re sure you may find even better offers out there. However, do not risk using an unreliable accountant to save yourself a bit of money because you could be fined if the information submitted is inaccurate or misses the deadline.
What are the important dates in relation to 2020/21 self-assessment tax returns?
If you need to submit a 2020/21 tax return, the information must be with the government by the 31st January 2022. A 2020/21 tax return applies to the 2020/21 tax year, which ran from the 6th April 2020 to the 5th April 2021.
Top 10 umbrella companies
If you’re looking for an umbrella company you can trust, we recommend you choose one that is accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport. These are the two most respected professional bodies in the UK committed to ensuring the supply chain of temporary workers is compliant. Our top 10 umbrella companies are all accredited by one of these regulatory bodies – meaning you’ll be in safe hands.
Another piece of advice – if you believe you need to complete a self-assessment tax return for the 2020/21 tax year, speak with your umbrella company. They may offer accountancy services or be partnered with an accountant that will provide you with a special price. As the saying goes – if you don’t ask, you don’t get!
