Tax Return: A stress-free approach
Shona Lowe | August 28, 2019
Time to read: 5 minutes
There are few people who look forward to sitting down and conducting the often tedious process of completing a tax return. However, by organising your finances throughout the financial year, you’ll have enough time to complete your tax return, and by following some simple steps doing your tax return can also be stress- free.
The UK government calculated that 93% of self-assessment tax returns were filed by the deadline in 2019, an increase from previous years. Therefore, it appears that we are getting better at ensuring our tax returns are completed on time.
However, HM Revenue and Customs (HMRC) still received a range of strange excuses from those who have not completed their tax return on time, from “I’m too short to reach the post box” to “my boiler had broken and my fingers were too cold to type.” Read on to make sure you don’t find yourself having to come up with something similar.
Do you need to do a tax return?
If you consider that any of the following bullet points apply to you, then you may need to complete a tax return:
- You are a self-employed sole trader earning over £1,000 a year.
- You have been a partner in a business partnership or are a shareholder.
- You receive an income from renting out a property.
- You receive an income from tips or commission.
- You receive an income from savings, investments or dividends.
- You receive foreign income.
- You pay into a private pension and are entitled to higher rate tax relief on those payments
- You receive Child Benefit and your income (or your partner’s) is over £50,000.
Time is everything
Be conscious of time. The tax year runs from 6 April to 5 April the following year – the deadline for filing your 2018/19 tax return is 31 October 2019 for paper returns and 31 January 2020 for online returns. You also have to pay any tax you owe by 31 January 2020.
For many people, either because their tax return is complex or they would simply rather not have to spend their time doing it, it can make sense to seek the expertise of a professional to handle their tax return. If that’s you, ensure that you do this in plenty of time before the submission deadline. Likewise, if you are planning on filing your tax return yourself, then setting aside enough time to do that is equally as important. It takes time to set up a Government Gateway account as the password is sent through the post, so if you are filing online don’t leave it to the last minute. You can find out more on how to do this on the gov.uk website.
Organisation is key
Think in advance about what paperwork you will need to complete your tax return, such as the following:
- P60 from an employer to declare your income and the tax applied to it.
- P45 if you have left a job within the last tax year.
- P11 or P9D to document benefits and expenses.
- Details of the interest on your bank or building society accounts.
- Details of dividends or other income from investments.
- Details of pension contributions
Are you entitled to pension tax relief?
Having details of your pension contributions is important if you could be eligible for Pension tax relief. “Net Pay” schemes organise tax relief for you, but “Relief at Source” schemes can require higher-rate taxpayers to submit a claim using their tax return to organise their extra relief. Because pension tax relief is dependent upon the type of pension scheme you are paying into it can be helpful to seek advice from a professional to ensure that you are aware of what your pension scheme entitles you to.
What will happen if you don’t complete your tax return on time?
Those who do not submit their tax return or pay the tax they owe by the deadline will only have to pay a penalty of £100 provided they submit and pay what’s needed within 3 months of the deadline. However, interest is applied on payments more than 30 days late and after 3 months additional penalties of £10 a day (up to a maximum of £900) can be demanded. If you have failed to complete these tax requirements after six months, there will be a penalty of 5% of the tax which is due or £300, whichever is highest. And that happens again after 12 months if things are still outstanding.
Therefore, to escape these heavy fines completing your tax return on time is key.
Steps to remember:
- Ensure that you are registered for your tax return on time including having your Government Gateway account in place.
- Identify the extra income which you receive, which is not accounted for in the tax deducted from your wages, savings or pensions.
- Pull together all necessary financial documents well in advance of January 2020.
- Ensure that you are aware of what you are entitled to, for example higher rate pension tax relief.
- Complete the filing of your tax return as far in advance of January 2020 as you can to allow for any issues that may delay you.
Consider seeking Advice
1825 has tax return specialists so if your personal circumstances make your tax return more complex than you feel happy to deal with or you would simply rather someone else completed your tax return for you, get in touch with us so that we can take this off your to do list.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in August 2019.