Let's hope this isn't a panic read for this years' self assessment, which sees the deadline of tomorrow for submission. Few tasks evoke as much trepidation as completing a self-assessment tax return in the United Kingdom. However, armed with knowledge and a systematic approach, this seemingly daunting task can be tamed.
Understanding the Basics
A self-assessment tax return is a declaration of income, expenses, and other relevant financial information submitted to Her Majesty's Revenue and Customs (HMRC) by taxpayers in the UK. It applies to various individuals, including self-employed professionals, landlords, company directors, and those with significant investment income.
Key Deadlines
One of the cardinal rules of tax compliance is punctuality. The deadline for filing paper tax returns typically falls on October 31st following the end of the tax year (April 5th). However, for those filing online, the deadline extends to January 31st of the subsequent year. Missing these deadlines incurs penalties, initially of £100 and added interest, so early preparation is crucial.
Gathering Necessary Information
Before diving into the tax return, gather all pertinent documents such as P60s, P11Ds, bank statements, receipts, and invoices. These documents provide the foundation for accurately reporting income, expenses, and potential tax reliefs. Throughout the year, use an app such as 1tap where you can process receipts and income as you go, making the daunting task much easier and you will know where you're at throughout the year with what tax liability you'll have.
Navigating the Online Portal
Filing online offers several advantages, including extended deadlines and instant calculations. HMRC's online portal provides a user-friendly interface guiding taxpayers through each section of the tax return. It's imperative to register for online filing well in advance to ensure smooth navigation and avoid last-minute technical glitches.
Income Reporting
The online system collects data about which parts of the self assesment apply to you such as employment income, self-employment profits, rental income, and investment dividends. Each income source must be declared accurately to avoid potential discrepancies and subsequent enquiries from HMRC.
Deductible Expenses
Taxpayers are entitled to deduct allowable expenses incurred wholly and exclusively for business purposes. These may include office rent, utility bills, travel expenses, and professional fees. Careful documentation and categorization of expenses are essential to substantiate claims and minimise tax liabilities.
Capital Gains and Losses
For individuals disposing of assets such as stocks, properties, or valuable possessions, capital gains tax implications arise. Reporting gains and losses accurately is paramount, with various reliefs and exemptions available to mitigate tax liabilities.
Tax Reliefs and Allowances
HMRC offers an array of tax reliefs and allowances to eligible taxpayers, such as marriage allowance, pension contributions, and charitable donations. Claiming these reliefs can significantly reduce tax liabilities.
Review and Submission
Upon completing the tax return, conduct a comprehensive review to ensure accuracy and compliance. Double-check all figures, calculations, and supporting documents before submitting the return electronically. Any errors or omissions may lead to unnecessary enquiries or penalties.
Seeking Professional Assistance
Completing a tax return is a simple enough task if you have all the information to hand. However, advice from an Accountant who can complete the return on your behalf is sometimes a route for those who are adversely against such a task.
Conclusion
To conclude, the key to making this process more palatable is be prepared. Don't leave it all to the last minute, you will certainly make errors and this may lead to mis-reporting information.