Take the pain out of filling out your tax return
YOU’LL FACE TOUGH PENALTIES IF YOU FAIL TO MEET THE DEADLINE, WARNS
NOBODY likes completing their selfassessment tax return, but millions of us simply don’t have a choice in the matter.
Every year, more than 12 million must fill in a tax return and file it with HM Revenue & Customs – and boy do we hate it.
There are loads of reasons to delay submitting your tax return. It’s complicated, boring, time-consuming and when it’s over, you have to pay a bill.
There is one overriding reason why you must comply though. It’s the law, and there are stringent penalties if you don’t.
The first big deadline arrives on October 31, when the 1.3 million people who still submit a paper return must have sent it. Most taxpayers submit their return online now, and they have until January 31, 2022.
James Hunt, tax adviser at ATC Tax, said tax returns will become more digitalised as the Government tries to simplify and streamline the system, so leave paper behind if you can.
“It makes sense to get ahead of the curve and embrace digital sooner rather than later,” he says.
That deadline will come around fast enough, so even if you do plan to file electronically, it’s a good time to start preparing the necessary information.
Here’s what you need to know:
Do I have to submit a return?
The good news is that you will not usually need to send a return if your only income is from your wages or pension.
However, you may need to send one if you have any other untaxed income, such as money from renting out a property, tips and commission, income from savings, investments and dividends held outside a tax-free Isa, and foreign income.
The self-employed, company directors and those with varied sources of income on top of PAYE or a pension are most likely to send a form.
If you didn’t submit a return for last year, you probably don’t need to do so again unless your circumstances have changed – say, you have started working for yourself, are now renting out a property or have made a large capital gain.
There are no penalties for missing the October 31 deadline: it simply means you have no choice but to submit electronically. However, if you also miss the January 31 deadline for online returns, you face an automatic £100 penalty, with more to follow if you continue to delay.
HMRC has stopped sending out paper returns, so either download one from government portal gov.uk or apply for one to be posted.
Take action now
Don’t leave it until the last minute, warns Grace Taylor, accounts senior at the Accountancy Partnership. “Nobody enjoys doing their tax return, but it is so important to start thinking about it well before the deadline to avoid fines and other complications which come with submitting late,” she says.
And as deadlines loom, accountants get busier. “The later you leave it, the harder it will be to find someone with time to help,” she adds.
To complete your tax return, you will need your Government Gateway login and Unique Taxpayer Reference, as well as all relevant accounts, receipts and paperwork.
“Gather all this up before starting the return so you have everything accessible in one place,” she says.
Incredibly, four in 10 small and medium-sized business owners are still using paper-based systems to keep accounts, while one in 10 stores essential documents loose in a drawer or shoebox, Accountancy Partnership research shows.
Grace says: “If you have spent hours looking through drawers and shoeboxes for these details, learn from your mistakes and implement a system so that you won’t be floundering again next year.”
If this is your first tax return, check out the self-assessment section at gov.uk, to understand what is required.
“Seeking help from friends and family who are experienced in tax returns is also sensible,” she adds.
“While finance can be daunting for many, asking for help is the best way to avoid fines and miscalculations. After a year of financial hardship, that’s the last thing that you need.”
If you have claimed a Covid grant under the Self Employed Income Support Scheme (SEISS), remember the money must be declared on your tax return.
Gather your paperwork
Melanie Hicks, tax partner at accountancy firm HW Fisher, says allow time to gather paperwork.
“This includes your P60 which will confirm the total tax you have paid on your income. You will also need a record of benefits and expenses which can be found on your P11D or P9D forms. If you have left a job in the last tax year, you will also need a P45 from your previous employer.”
Make sure you keep details of any pension contributions to allow you to claim the right tax relief for them.
You will also need details of all your gift aid payments.
“Have you sponsored a friend to run for charity? This can be included as HMRC provides some tax relief on charitable giving,” Melanie says.
Once you have completed your tax return, make a copy and keep a proof of postage too.
“If you are employed or a pensioner, please keep all paperwork for 22 months from the end of the tax year to which it relates to. If you are self-employed or letting a property, keep all paperwork for five years and 10 months.”
Don’t forget the personal savings allowance can be applied to interest earned on your savings.
Melanie says: “You could receive up to £5,000 in interest, tax-free.”
Roll up your sleeves now
Laurence Taylor, founder of social enterprise Easy as123, says don’t be put off by all the jargon.
“HMRC says tax shouldn’t be taxing but still manages to make this the most complicated tax return in the world, with lots of difficult words, double negative questions, and things that don’t apply to 99.9% of the population,” he says.
You still have to tackle it though. “Take a deep breath, don’t panic, and reach out for advice if you get stuck – you won’t be alone.”
“If you are self-employed or have some investment income or income from property, HMRC will only need to see a few totals.
“Try to use your actual bank transactions for your ins and outs so they will be correct and traceable.
“If you’ve got income from several different places then go to gov. uk and download any relevant forms, such as SA102 (Employment) or SA105 (UK Property).”
Laurence says you should also think ahead and budget for your next tax bill.
“By the time the self-assessment deadline comes around, it can be tricky to determine how much you owe, so start setting the necessary funds aside.”
This is particularly hard this year as a third of Brits have either seen their savings ravaged by the pandemic, or had to take on more debt to make ends meet, according to research from Royal London.
Easy as 123 works alongside the insurers Changemakers’ programme, which helps people set aside money as a cushion against life’s nasty little shocks – including tax bills.