Insights

There are now under 30 days left until Christmas Eve, which means the clock is ticking rapidly towards three very important deadlines. Each of these has two uniting features – the need to be well prepared in advance and, in doing so, the opportunity to save money!

Super saver delivery with Amazon – Dec 19^th

First of all is Christmas shopping. There’s less than a month to go, but with 7 day online deliveries now commonplace, we don’t have to worry too much about getting presents delivered on time. However, that service costs a premium and is an expense that can be avoided with early planning through some shopping outlets. The last day to get free super saver delivery on gifts from Amazon is December 19^th.

Tax code deadline – Dec 30^th

Next on the list of really important deadlines is 30^th December. This is the tax code deadline. If you are self-employed, have to submit a tax return or pay additional taxes and want HMRC to collect these tax payments through your tax code each month, you must file a tax return online by 30^th December. This ensures that your details have been processed before the January self-assessment deadline. Using the tax code deadline can be advantageous because if you have a liability of £3,000 or less, rather than having to make a single tax payment in a lump sum by the self assessment deadline of 31^st January, you will start making regular monthly payments from April 2015. In effect it is an opportunity to obtain interest free credit from HMRC, provided adequate plans have been made beforehand.

Self-assessment tax return deadline – 31^st January

The last deadline to be mindful of is the self assessment tax return deadline of 31^st January. Anyone with income that is not taxed at source is required to complete a self-assessment tax return. This includes self-employed business owners, people with additional income sources such as rental income, and higher rate taxpayers who must pay additional tax on income such as bank interest and dividends.

The initial deadline for filing paper tax returns has now passed, and all outstanding 2014 self assessment returns must be filed online by no later than midnight on 31^st January. In addition, it is necessary to pay any outstanding 2014 tax liability on that date, together with a payment on account towards your 2015 tax liability (this figure will be 50% of your 2014 liability).

Filing a personal tax return might be an administrative burden, but with HMRC out in force to collect as much revenue as possible, it is important to make sure it is accurate and filed on time. Apart from the fact that late returns result in an immediate £100 penalty (which will apply even if no tax is payable) and possible daily penalties of £10 per day, it’s never a good idea to fall under HMRC’s spotlight. This could increase your chances of being targeted for an enquiry should HMRC’s officers start to wonder whether your business record keeping is being maintained diligently and whether there might be a tax shortfall to detect.

A pain free way to complete your self assessment tax return

Here are some helpful tips to ensure gathering all the information required for your tax return is not too painful:

1. Know if you need to file a Self Assessment tax return

This might seem a bit obvious but is not always. Firstly if you have been issued with a self assessment by HMRC, you must complete and return it. However, if you have not been issued with a return for completion, because we are in a regime of self assessment, you still have a duty to calculate whether you owe tax and if so, to complete and file a return within the statutory deadline. In addition, all business owners, whether they are operating as a sole trader, partnership or as a director of a limited company, need to complete a tax return.

2. Allow time to get your taxpayer reference information from HMRC

If you are filing online for the first time you will need to obtain a unique taxpayer reference number if you do not already have one; this typically takes 10 days to process. This means it is necessary to register before 21^st January to safely have enough time to file your tax return by 31^st January.

3. Complete the return accurately and precisely

It can be tempting to use approximate values and roughly the right figures if you do not have the exact information, but this could attract unwanted scrutiny from HMRC. If rounded up numbers must be used the return should be noted accordingly and these figures should then be adjusted as soon as the correct values are obtained.

4. Include all the relevant forms required

Many different types of income and outgoings should be included on a tax return such as earnings, benefits in kind, business profits, rental income, capital gains, dividends, bank interest received, pension contributions, allowable interest payments, gift aid donations and so on. Often these will involve the completion of separate supplementary pages. Note that interest received on ISA savings accounts or some types of National Savings bonds are tax-exempt and need not be included.

5. Account for losses

If losses are incurred ensure that the relevant claims are made to offset the losses against your various sources of income to reduce your tax liabilities. There are specific rules as to how these may be offset and professional assistance may be required to minimise your tax liabilities.

6. Offset allowable expenses against income

There are a variety of expenses that can be offset against income provided they are allowable within the legislation. Eligible expenses include business expenses incurred for the purpose of a trade, capital allowances, pension contributions, allowable loan interest and gift aid donations. Some are subject to restrictions and again, professional advice may be required.

7. Have enough money available to pay your tax bill

You will need to pay your tax for 2014 plus an amount on account for 2015. If you anticipate your 2015 income will be lower than your 2014 income it is possible to reduce your 2015 payment on account and a claim to do this should be included on your return.

For help completing your self-assessment tax return, please contact Simon Paterson by emailing sp@rjp.co.uk.