Contrary to popular opinion, it’s not only self-employed people who have to submit a tax return. If you were a company director in the relevant tax year, let out a property or received dividends, you will probably need to submit one, too.
Whatever your reasons for filing a return, IBISS & Co are here to help. In this blog – the second in our ‘ten tips’ series – we’ve got another helping of handy hints on how to tackle taxes with minimal stress (don’t forget to read part one, if you haven’t already!).
#1: Dates for Your Diary
Preparation is crucial when it comes to submitting your tax return – it really does pay to have all key dates firmly noted in your diary. This can also prove helpful when working out which period you’ll be paying taxes for; for some individuals, it will depend on when their books are made up to, but for the vast majority of people, it will relate to the last full tax year. If you’re filing a return in January 2018, for instance, you are probably expecting to pay tax on income earned between 6th April 2016 and 5th April 2017.
Here are some key dates for the tax year ended 5th April 2017:
- 5th October 2016: the registration deadline for all individuals who need to submit a self-assessment tax return.
- 31st October 2017: the deadline by which all paper returns must be submitted.
- 31st January 2018: the deadline by which all online returns must be submitted.
- There are some exceptions – for instance, if you’re a trustee of a registered pension scheme or non-resident company, you will be required to submit a paper return by 31st January 2018. Do check the HMRC website or seek advice for full details of these exceptions.
Remember, too, that you must pay all tax owed by midnight on 31st January 2018.
#2: The Early Bird Catches the Worm
It can be tempting not to put money aside as you go along and to simply deal with your tax bill when the deadline rolls around. We’d strongly recommend that you save in advance, however – particularly if you are eligible for payments on account, which applies to the majority of individuals filing a return.
‘Payments on account’ are essentially an early form of collection, and require you to make two payments per year (by 31st January and 31st July). Each payment is an estimate that is based on the previous year’s tax bill (you pay 50 each time); and if you are self-employed, these advance payments also include Class 4 National Insurance contributions. Should further funds be required when you submit your tax return for the relevant year, you will need to make a balancing payment.
Not everyone has to make payments on account, however. If your last self-assessment bill was below £1000, or if you have already paid 80 of the tax you owe, you will be exempt.
#3: Don’t Forget About Pension Payments…
Some tax relief is available for payments that are made into a personal pension or to a charity – meaning that you may be able to reduce the amount of tax you ultimately pay. If your pension fund isn’t set up for automatic relief, for instance, or if you’re a higher-rate taxpayer, you should be able to claim. This is definitely worth investigating before filing a return.
#4: …Or Personal Allowance
Whether you’re an employee working for a corporation or a self-employed individual, you’re entitled to a personal allowance. This allowance represents an initial amount of earnings on which you do not pay tax, and varies depending on the tax year.
For the 2016-2017 tax year, you do not have to pay tax on earnings up to £11,000. Basic rate (20 ) tax applies to income earned between £11,000 and £43,000; earnings above £43,000 are taxed at a rate of 40 (45 for earnings over £150,000).
Please be aware that your personal allowance will be curtailed once your adjusted net income reaches a certain level. If you earn over £100,000, your personal allowance will be subject to a £1 reduction for each £2 earned thereafter (for example, if your adjusted net income is £120,000, your personal allowance will be reduced by £10,000).
#5: Talk to an Accountant Before Filing a Return
We hope that these tips have prepared you for the process of filing a return: provided that you have all documentation to hand, have set aside some money, and have kept clear records, it should not be a worrisome experience. That said – and though we appreciate that we may sound biased! – the only certain way to minimise stress is to speak with an accountant.
Hiring an accountant will not only ensure that you avoid the onerous form-filling process – reducing the fear associated with making mistakes or missing out vital details, and making certain that you do not incur unexpected fines – but also we’ll alert you to any potential cost-savings. Furthermore, we’ll reduce the burden on your already heavy workload. Why waste time sifting through paperwork or tracking down minor details when an accountant can do it for you? By leaving your return in the hands of the experts, you will enjoy all of the benefits of an accurate tax submission without any of the negatives. Please feel free to contact IBISS & Co today for a no-obligation quote.