Anyone new to tax self assessment should note Wednesday 21 January as being the latest they ought to register online to meet the deadline of 31 January for submitting their tax return for 2013/14.
Failure to meet the tax deadline at the end of the month means an automatic fine and if money is outstanding, charges can quickly mount up.
It is wise to register for online filing at least 10 days in advance of the tax return deadline to provide enough time for an activation code to be sent to you. This can take at least seven working days (longer if you live abroad). In previous years HMRC has issued penalties to taxpayers who missed the filing deadline because activation codes did not arrive in time.
With the number of people in self employment at a 40 year high*, not to mention the rise in buy-to-let landlords, there will be a crescendo of people rushing to complete their tax return in the next few weeks.
“These trends towards self employment and residential property letting, combined with a rise in scrutiny from the tax authorities and an increasingly rigorous penalty system, means more people could face fines than in previous years,” according Tina Riches, national tax partner at Smith & Williamson, the accountancy and investment management group.
Tina also highlights: “Each year a new group of people is brought into self assessment to pay the High Income Child Benefit Charge (HICBC) introduced in 2013. This applies to the higher income partner of a couple in receipt of child benefit, where that person earns over £50,000 pa.”
“This charge can therefore catch new parents, partners whose income newly trips over the £50,000 mark, those who move into new relationships with another parent and sometimes even grandparents who care for a child. If you think you might be caught and need to do a tax return, then seek help swiftly.”
“Even if your tax liability is nil but HMRC has asked you to file a return, you will get a £100 fine if you miss the end of January filing date,” says Tina. “In 2014 over 700,000 people failed to file their return on time, bringing a windfall of penalties to the Exchequer.”
Tina also explains that completing a tax return can bring rewards: “Each year, millions of higher rate tax payers making pension contributions forget to claim the full tax relief. Even if you are enrolled in your employer’s scheme in a group pension plan – one of the commonest arrangements - you need to claim the relief.
“For every £1,000 a 40 per cent rate tax payer puts into their pension, they are eligible for £400 tax relief. While they automatically get tax relief of £200, the majority of people must claim the balance of £200 tax relief. To do this, they need to complete a self assessment tax return.”
She provides her top tips for completing the annual self assessment tax return:
- Register straight away for online filing
- Collect the paperwork, which typically includes:
- For the employed: you need your payslips or their year-end form (P60), details of benefits in kind (P11D).
- If you have investments: details of share dividends, sales, losses, interest on bank accounts and any other investments.
- Rental property: you’ll need details of incoming receipts, expenses, capital gains and losses, and so on.
- Pension contributions: get confirmation of the amount you have contributed.
- For the HICBC: details of the child benefit received and knowledge of which partner has the higher income.
- If you are missing some of the figures, make an estimate and explain your working.
- If you anticipate a drop in your self assessment taxable earnings for the 2014/15 tax year, you can claim a reduction in your payment on account.
- Keep a record of your completed form and associated paperwork. If you are in a business, eg you are self employed, this will be for a further five years, so up until 31 January 2020. Otherwise, you must keep the paperwork until 31 January 2016.
- Watch out for recent changes in the law which affect 2013/14 tax returns:
- If you have been moving in and out of the UK ensure you are aware of the statutory residence test rules.
- If you have carried out any egregious tax planning you may need advice on whether the general anti-abuse rule applies. This is a subjective test and will be difficult for taxpayers to apply.
- If you are not sure about something then get help. This may be available from:
- Specialist tax advisers and accountants.
- Voluntary organisations that deal with those on low incomes.
- HMRC itself – although you can no longer visit an enquiry centre you can join an HMRC online chat session – details are on gov.uk.
*According to figures from the ONS
National Tax Partner
T: 020 7131 4252
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Smith & Williamson is the official sponsor for the National Business Awards’ search for the Entrepreneur of the Year in 2013, 2014 and 2015.
Smith & Williamson LLP
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International
The word partner is used to refer to a member of Smith & Williamson LLP.