With the 31 January deadline for the 2016/17 self assessment tax returns almost upon us, Blick Rothenberg offers some last minute tips.
Around 10 million people must complete a self-assessment tax form every year, typically because they are self-employed, run their own business or have untaxed income or capital gains, such as from a buy-to-let property, a trust or investment portfolio.
So whether you have just started out as a buy-to-let landlord or you are an established property investor, you need to have filed your 2016/17 self assessment tax returns by the end of tomorrow.
Stefanie Tremain, personal tax manager at Blick Rothenberg, said: “Individuals who miss the 31st January deadline and are up to three months late will incur in an automatic £100 penalty. Completing and filing your self assessment form may seem a hell of a lot of work but it needs to be done.
“After three months, HMRC will start charging penalties of £10 per day and after 6 months the penalty will be 5% of the person’s tax or £300 – whichever is higher.”
She added: “Within six months, it could rack up to at least £1,300. The penalties start to become even more serious if your tax return is more than 12 months late and can be as much as 200% of the tax. These penalties will be charged even if the person doesn’t actually have any tax to pay.”
Here are some tips that should make the process of filing the self assessment form easier:
+ Don't forget to declare child benefit payments if your income is over £50,000.
+ If you are renting out a property, claim all revenue expenses associated with the letting including letting agent fees, mortgage interest, ground rent, replacement of furniture and appliances but not capital expenditure such as improvements to the property.
+ If you are letting out a room in your own home is it more tax efficient for you to claim the annual £7,500 (£3,750 for properties owned jointly) Rent a Room scheme allowance?
+ Do you need to claim higher rate tax relief in respect of your pension premiums? Where your pension contributions are paid net of basic rate tax, remember that HMRC ask for the gross figure of your pension premiums not the amount you pay.
+ Should your pension annual allowance be restricted if your income exceeds £150,000?
+ Include all the Gift Aid donations you have made during the tax year to claim any higher rate tax relief. You can also include Gift Aid donations you have made after the end of the tax year but before you file your return and carry these back. (Remember, you can’t claim for relief for these donations again next year so keep a record of what you have carried back).
+ Where you have a P11D form from your employer, include all the figures on your tax return (boxes 9 to 16 of the employment pages) and ensure you include a corresponding claim for relief in respect of any business expenses on the P11D (boxes 17-20 of the employment pages).
+ If you use your car for business trips and your employer pays you less than the HMRC maximum approved mileage rate (45p for the first 10,000 miles and 25p per mile above this) you can claim the excess.
+ If you are a member of a professional body required for your employment, you can include the cost of the subscription as an allowable deduction.
+ If you made capital gains of less than £11,100 in the year you only need to include these on the return if your total proceeds exceeded £44,400.
+ If you have disposed of a UK residential property, report the disposal correctly to ensure the correct rate of tax is charged (i.e. up to 28% rather than 20% for gains on most other assets).
+ Do you have any capital losses from earlier years to carry forward and use? You need to “claim” these capital losses. Many people assume that if only losses are realised they don’t need to be reported on the return, but this is not the case and capital losses must be claimed within 4 years to remain available.
If you received foreign dividends of up to £300 in total you can include these in the main return effectively as UK dividends and do not need to include supplementary foreign pages.
+ Don’t forget to include your state pension figures – although the state pension is paid gross, it is still taxable and needs to be included on your tax return.
+ Don’t forget National Insurance – Class 4 can be the forgotten element of tax bills for self employed individuals. Also individuals with two employments earning over approx. £42k may overpay Class 1 and HMRC can overlook notifying you of NIC overpayments.
+ If you are in PAYE and your tax liability is below £3,000 for the year, would you prefer to have the tax collected by way of a restriction to your code for 2017/18 rather than pay in one lump sum by 31 January 2018? If so you should try to submit your tax return by 30 December 2017.
+ If you are due a repayment, make sure you claim a refund and include details of the UK bank account you want the refund to be paid into as refunds are made more quickly this way, rather than by asking for a cheque.