THE clock is ticking. With the 31 January deadline fast-approaching if you’re due to submit your self-assessment tax return and make any payment due, you need to get it done or face a fine.
There are all sorts of people who have to fill out a tax return, from business owners to some parents. A self-assessment tax return needs to be completed by employees or pensioners with an annual income of £100,000 or more, those who have a pre-tax investment income of £10,000 and trustees or representatives of someone who has died.
If you have one or more properties that you rent out (accidental landlords included), you invest in shares outside your ISA or you’re a higher-rate taxpayer and you’ve paid into a SIPP, you will also need to fill out a self-assessment tax return. As a parent who claims child benefit you’ll also need to fill in a tax return if either you or your partner/spouse earn more than £50,000.
HMRC used to like to tell us ‘tax doesn’t have to be taxing’ but it certainly can be costly if you don’t play by the rules, make a mistake, or you simply don’t stay up-to-date with tax changes that affect you.
Follow these tips to make sure you don’t fall foul of the rules.
1. Meet the deadline
Fail to submit an online tax return before midnight on 31 January and you could face an automatic £100 fine. This increases the longer you delay, so get your submission in on time. If you wanted HMRC to collect tax you owe from your wages or pension, you’ve missed the boat, so you’ll also need to pay any tax due by 31 January or face a fine.
2. Watch out for typos
Whether it’s interest from gilt edged and other UK securities, life insurance gains, income from share schemes, foreign income or a taxable lump sum from an overseas pension schemes, declare it and make sure you also complete the relevant supplementary sections.
The most common mistakes are often the most basic, so double-check all your figures and make sure you’ve filled in every part of the return that’s relevant to you.
3. Declare your pension contributions
If you pay money into a pension aside from your workplace pension, you need to make sure you’re entering those contributions onto your tax return, in the correct box and for the right amount. If you make a mistake here, you could either miss out on tax relief or claim too much – in which case HMRC could charge interest on the underpayment.
If your employer deducts your pension contributions from your salary, you don’t need to enter these separately on your tax return, as the available tax relief will have been applied through your net salary.
4. Claim tax relief on charitable giving
Especially if you’re a higher-rate taxpayer and you’ve made any donations to charity under the Gift Aid scheme, remember to record these donations in the main section of your tax return. Fail to do so and you’ll miss out on some tax relief that’s due to you.
5. Get to grips with CGT and dividend changes
From this April, the tax-free allowance on capital gains is being more than halved. This means that any profits that exceed £6,000 that you make selling an asset, such as a second property or investments held outside an ISA after the 6 April, will be subject to capital gains tax (CGT). And from April 2024 that tax-free allowance drops to just £3,000.
The dividend allowance is also being cut from £2,000 to £1,000 and then just £500 from April 2024. So if you’re thinking of selling any assets, consider your timing carefully.
And if you do make a mistake…
Then you usually have 12 months from 31 January to correct it.