We are given ten months from the end of the tax year until 31 January to complete online tax returns. Despite this, over 730,000 of us left it until 31 January to do so last year and another 730,000 missed the deadline altogether.
Apparently 2,616 poor sods even filed returns on Christmas Day – fortunately most before the Queen spoke at 3pm. I have an admission to make… I was one of them. This was not for my own return you understand but for my adult children for whom I perform a tax service on extremely reasonable terms. Despite reminders, they tend to arrive on Christmas Eve, throw me some papers, and rapidly proceed into the festivities. Christmas morning is often the only time when we are all together and sober!
To help those who may find themselves in a similar position I offer the following practical tips.
1. If you need to complete a return you have to be registered with HMRC
If this is your first return you can do so by visiting the Gov.uk website after which you will be sent a ten digit unique taxpayer reference (UTR). You will need to set up a “Government Gateway” account if you do not already have one. An activation code will be sent by post and HMRC advise that you should allow 20 days to receive this, so don’t leave it late.
2. Even if HMRC have not told you that you need to submit a return, you may still need to do so
If in doubt, visit this page on the Government’s website to find out.
3. Once into the self-assessment site you will be asked series of questions about yourself and your financial affairs
If you get it wrong at this stage you are likely to provide incomplete information, so take care. In particular, you may have more than one employment and perhaps some self-employment income. Pensioners in particular can have multiple income sources such as the state pension, a private pension, part-time employment, perhaps some self-employed consultancy as well as investment income.
4. Most boxes on the return are straightforward to complete but you can be caught out
You may have received benefits that your employer left off your P11D form because they were unaware of them. Likewise, be careful not to claim for allowable expenses where your employer has a dispensation and has already claimed an offset. Even the best-informed people can get this section wrong.
In May 2009, The Telegraph discovered that 42 ministers in the Labour government had claimed on expenses for tax advisers to complete their tax returns and then failed to declare this as a taxable benefit in kind.
5. For those in self-employment the return is used for “class 4” National Insurance purposes as well as income tax
But there are a number of exemptions, including for those under-16 at the start of the tax year and those over state pension age.
6. The return also reminds you to pay “class 2” National Insurance
Even if you are not required to do so, you should consider electing to pay voluntary contributions to protect your state pension and other statutory benefits.
7. If you rent out property consider “rent a room relief”…
… and whether the property qualifies as a furnished holiday letting. Incidentally, HMRC is currently running a let property campaign to help you comply for any properties which you have failed to declare in the past. The campaign offers favourable terms and the online declaration is easy to use – search “let property campaign: your guide to making a disclosure”.
8. Foreign income can be particularly complicated
This is especially true with dividends on shares where tax has been withheld overseas. Many overseas companies withhold tax at a higher rate than the reduced rate set under the relevant double taxation treaty. You can only claim relief on your tax return at this reduced rate and may need to make a separate reclaim from the overseas tax authority for the difference.
9. The capital gains section is probably the most complicated part of the return
But fortunately, only 280,000 people typically need to complete it and pay CGT. You are not required to do so for 2018-19 unless you have sale proceeds of more than £46,800 or total gains over the £11,700 annual exemption.
10. If you receive the state pension the return says that you should fill in the amount that you were entitled to receive in the year
The wording here is confusing because you are actually taxed on the amount that accrues over the year calculated on a weekly basis. This is typically not the amount you were entitled to receive because it is paid every four weeks. HMRC needs to correct this anomaly.
11. You should claim for personal pension contributions…
… but only for those made outside of a company pension scheme, which should already have been taken into account through the PAYE system.
12. The marriage allowance was in the news in the run up to the election
For 2018-19 you can transfer up to £1,190 of your personal allowance to your spouse, provided your income was less that £11,850 and they were not higher-rate taxpayers. This can save you up to £250 a year.
13. If you owe tax of less than £3,000…
… you can elect to have it collected through your 2020-21 PAYE coding notice but you must submit the return by 30 December.
[Source: Mike Warburton @ The Telegraph, 18 December 2019]
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