The most dreaded of all January traditions must surely be the Self Assessment tax deadline. With just over a week to go, millions of Brits are racing to get theirs done. It’s time to work efficiently.
Hello, is it me you’re looking for?
Firstly, double-check if you need a Self Assessment form. Broadly speaking, if you have received income that has not had tax deducted at source, you will need to submit a tax return.
This applies most often to small business owners, shareholders and self-employed people, but also landlords who receive rental income from a property they let out. And the Child Benefit clawback for those earning over £50,000 has dragged yet more people into the tax return system.
You can always try the HMRC online tool which indicates whether you need to file a return. Leaving it this late means you will probably face a penalty – you need a reference to file your return and HMRC take six weeks to issue them.
Get a grip
If you do need to complete a form, it’s time to get cracking. Start by digging out the details of all the income you received between April 2014 and April 2015. This includes income from employment, rental properties or shares you own, and bank interest.
If you have payslips or invoices for work you’ve done, great. If you don’t, your bank statements will give you much of the same information – though you’ll need to do some detective work if you were paid by cheque. Your bank statements will also contain other things you may need to include – such as how much you paid in pension contributions, charitable donations and so on.
Working through the form – types of income
The most obvious source of income is a salary, which definitely needs to be declared. You should find the amount on your P60 form. You will already have been taxed on this income through PAYE, and won’t be taxed again - but you must still declare it. If you don’t have a P60, your March payslip will show your salary to date for the relevant tax year, along with how much tax was withheld from your earnings.
If you’re a company owner who receives some of your income as salary, that income must be included on the form. You must also declare dividends received from shares you own in the company. This rule applies whether dividends were received as cash or were reinvested.
Don’t forget to declare the interest you received from your bank. Your statements will often show how much interest you received over the preceding year, but if they don’t, you should be able to find the key information by calling into your branch or checking your online statements. This requirement also extends to dividends paid by any shares you own outside a tax-free wrapper like an ISA or pension.
If you receive rent from a property you let out, declare that too. The annual income from this should be easy to calculate, and you can claim mortgage interest and a wear and tear allowance against it, as well as any other bills incurred for repairs or maintenance.
What a relief
Finally, remember to claim all the tax relief you can. HMRC allows you to take into account certain payments you make, such as gift aid donations and personal pension contributions, on your return. Including these can help reduce your tax bill.
In addition, if you’re still repaying the cost of your student days, don’t forget to disclose the student loan repayments you made during the year.
While it is best to submit exact figures wherever you can, if you can’t find the actual numbers you can put in estimates. Ensure the figures you give are as accurate as possible and note on the form that they are ‘provisional’.
When completing the return online read the questions carefully. Is it asking for the cash figure (the amount you received or paid) or a “grossed up” figure that includes basic rate tax? This applies to interest you receive and pension and charitable payments you make.
Exact figures will be needed at a later stage, but for now providing educated estimates will save vital time – and can make the difference between getting your return done on time or not.
If completing the return online beware of sites that charge to submit your return: The official site will not charge you anything.
If you get stuck, you can call the Self Assessment Helpline on 0300 2003310. Have your Unique Taxpayer Reference (UTR) number to hand, and expect to wait – the lines are very busy at this time of year!
Large numbers of taxpayers will leave their online filing to the last minute, so get in ahead of them in case the system crashes at 11pm on the 31st.
Once the return is filled in, it’s time to pay up. There is usually a requirement to make a payment on account (i.e in advance) of the following year’s tax liability too. If you fail to pay your tax on time, you could face penalties or be charged interest.
By Tim Walford-Fitzgerald, Tax Principal at the chartered accountants HW Fisher & Company