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If you need to file a self-assessment tax return for 2021/22, you must do this online by 31 January 2023 if you want to avoid a late filing penalty. However, if you received your notice to file a tax return after 31 October 2022, a later deadline applies; you must file the return within three months of the date of the notice to file.

You must also pay any remaining tax that you owe for 2021/22 by 31 January 2023. If you are self-employed, this is also the deadline for paying Class 2 and Class 4 National Insurance for 2021/22. Where your tax and Class 4 National Insurance liability for 2021/22 is at least £1,000, you must also make your first payment on account for 2021/22 by the same date, unless at least 80% of your tax liability for the year is collected at source, for example, under PAYE.

The need to pay any remaining tax and National Insurance for 2021/22 plus the first payment on account for 2022/23 by 31 January may present something of a financial challenge, particularly given the cost of living crisis. However, if you have a source of income that is taxed under PAYE, there is a way to spread the cost without the need to agree to a Time to Pay arrangement —  by opting to pay your self-assessment bill through PAYE. However, there are certain eligibility conditions to be met, and you must also file your 2021/22 tax return online by the earlier date of 30 December 2022.

Am I eligible?

You can pay your self-assessment tax bill for 2021/22 through PAYE if:

– you owe less £3,000 on your tax bill;

– you already pay tax through PAYE (for example, on employment or on a pension);

– you submitted your 2021/22 tax return online by 30 December 2022 or you filed a paper tax return by 31 October 2022.

However, you will not be able to choose this route if:

– your PAYE income is insufficient to collect the tax that you owe (in addition to the tax on that income);

– as a result of the adjustment, you would pay more than 50% of your PAYE income in tax;

– collecting self-assessment tax through PAYE would more than double the tax paid in this way; or

– your tax bill was more than £3,000 but was reduced below this amount as a result of payments on account.

If you owe more than £3,000, you cannot use this option – it is not possible for £3,000 to be collected under PAYE and the balance to be paid by 31 January. However, if you are struggling to pay, you could consider setting up a Time to Pay arrangement to spread the cost.

Where you elect to pay your 2021/22 self-assessment tax bill through PAYE, your 2023/24 tax code will be adjusted to collect the tax throughout the 2023/24 tax year. This effectively allows you to spread the cost over 12 months and pay in interest-free instalments. In a climate of rising interest rates, this is an attractive option (although on the downside, it will reduce your take-home pay each month).

Additional reading:

Tax Management Act 1970, s8

Income Tax (Earnings and Pensions) Act 2003, s684

Income Tax (Pay as you Earn) Regulations 2003 (SI 2003/2682), regs. 14A, 14D

Contact Us

If you would like to speak to a member of our team about filing your tax return, we would be delighted to hear from you. You can get in contact by using our contact form, or you can call our office on 01326 660022.