The taxman cometh: 6 tips to help you complete self-assessment tax return
This Friday marks the end of a process that many have found divisive, emotionally draining, expensive, and time-consuming.
No, I’m not talking about Brexit. Friday 31 January is the deadline for completing your self-assessment tax return — the bane of existence for freelancers, the self-employed, and anyone who earns extra income outside their basic salary.
If you’ve left it to the very last minute and are yet to submit your form and pay off your tax bill, don’t worry — these tips from the experts may prove helpful.
What tax return?
Before you work yourself into a frenzy, check if you actually need to complete a self-assessment at all.
“It is not always necessary to complete a tax return to pay tax on untaxed income,” says Gill Philpott, tax and trust specialist at Ascot Lloyd.
“You can check if you need to file a self-assessment return online. If a tax return is not required, HMRC will still need to be told about any tax due, and you will need to arrange for this to be collected or paid.”
According to Philpott, it’s possible to receive up to £10,000 of dividend and investment income without needing to file a tax return. Instead, you could contact HMRC directly and ask them to change your PAYE code, so that any tax you owe is collected through your salary or pension over several months.
“However, any gains over the capital gains tax annual exemption of £11,700 or proceeds over £46,800 will need to be reported on your tax return,” she adds. “If you have not been issued with a tax return, but have reportable gains or proceeds, you will need to let HMRC know.”
Prepare yourself
Once you’re sure that you do have to file, gather all the information that you can before you sit down to complete your tax return. This should include a copy of the one you filed last year, and your login details, suggests Tom Evennett, private client services partner at EY.
“If you are going to use the HMRC online system to submit your tax return, make sure that you can and you have the necessary password to the portal,” he says. “Then look at your prior year tax return as it may jog your memory in relation to any bank accounts and investments that you may have forgotten about.
“Also, make sure that you have claimed all the reliefs available, including where you have made charitable donations in the current tax year (2019/20) — you can accelerate the tax relief by including it in your 2018/19 tax return.
“Finally, make sure that you pay your liability by 31 January, as otherwise interest will apply and surcharges kick in from 28 February.”
Leave plenty of time
The time it takes to complete the self-assessment will vary for everyone, but give yourself at least a couple of hours. According to software company GoSimpleTax, the average time its users spent filing their return was 63 minutes and 21 seconds.
That’s equivalent to running a 10k race, driving from Manchester to Leeds, or listening to Queen’s Bohemian Rhapsody 11.4 times.
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“You need to get started as soon as possible,” says Mike Parkes, technical director at GoSimpleTax.
“The reason our users are able to make light work of their tax return is due to our helpful notifications to stop you making mistakes. HMRC frowns upon deliberate errors and lateness. When it comes to submitting your self-assessment tax return, it’s crucial that you are prepared, organised, and fully understand what HMRC is looking for.”
More haste, less speed
While the deadline is fast approaching, there’s no point in rushing your tax return and being too hasty — you’ll be more likely to make mistakes and waste time correcting them, warns Viktor Stensson, founder of artificial intelligence accountancy tool Bokio.
“With the self-assessment deadline looming, it can be easy to imagine that this is an all-or-nothing situation,” he says.
“But don’t be preoccupied with visions of last minute filings, and dramatic mouse-clicking before the clock strikes midnight. I feel it is best to make sure that your return is submitted accurately, with all the workings and documentation stored safely.
“People often rush their tax return on deadline day, without having all the correct documentation, just to ensure that they submit on time. The consequences of an incorrect return can end up much bigger than submitting a day or two late.”
Daft errors
The advice of James Kipping, tax partner at MHA MacIntyre Hudson, is to refer to last year’s form and complete your tax return in one go so that you’re less likely to miss something. He also shares some common mistakes that people tend to make.
“Common errors include people forgetting that they need to know their spouse’s National Insurance (NI) number and date of marriage for a successful marriage allowance transfer, and that they can claim tax relief for capital items, like new computers,” he says.
“Finally, be aware that Class 2 NI is administered via self-assessment if you’re making a voluntary election — this can be a bit unclear on the form.”
Pocket your allowance
There are a range of expenses, reliefs and allowances you can claim which will reduce your overall income, and therefore how much tax you owe.
“When looking at your tax position, don’t forget to claim reliefs and allowances that are available,” says Gill Philpott. “These include personal pension contributions paid by higher-rate taxpayers, charity donations, and the marriage allowance if one of a couple earns below the personal allowance and the other spouse/civil partner is a basic rate taxpayer.”
Other expenses could include travel costs such as train tickets, your bills if you work from home, or even the cost of washing your clothes if you have to wear a specific uniform for work.
Hopefully, these tips will help you to complete your self-assessment. As HMRC likes to claim in its marketing: tax doesn’t have to be taxing.
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