Paying too much tax can occur for many different reasons. It can be as simple as having an incorrect tax code or the failure to claim allowances to which you are entitled. Her Majesty’s Revenues and Customs (HMRC) are very good at providing information about tax returns. Additionally information about statutory tax obligations is also readily available. However, one of the shortcomings of the HMRC is that they will very rarely inform tax payers of how to save money or of the rebates that they are entitled to. Typically it is left to individuals to find this information for themselves.
There are many individuals and businesses that are entitled to refunds which they never claim. Technically HMRC will allow individuals up to six years to reclaim tax overpayments. Simply complaining about paying too much tax will not ensure that you receive a rebate. A rebate can only be acquired by making a formal application.
Personal circumstances will always dictate what your statutory tax obligations will be. If you already pay tax on your salary or pension through the Pay as You Earn scheme then the chances are you will not need to complete a separate tax return. If however, you fall within the category of either being a higher rate tax payer, a company director or you have more complicated tax affairs then you will need to complete a tax return.
Items such as using your car for business, working from home or purchasing resources on behalf of your business can affect the taxes that you do or do not pay. There are different forms and supplementary pages for the various types of returns that will need to be made. For example there are specific pages that relate to individuals, directors, partnerships or trusts. The pages to be completed will very much depend on individual circumstances. It is important to remember that income which is not taxed at source such as rents or freelance earnings should be included in tax returns.
Failure to complete a tax return or pay close attention to your tax affairs could lead to unclaimed tax rebates or even overpayments. Exercising the right to choose how to arrange your tax affairs is fundamental right for individuals. HMRC will not normally object to individuals arranging their taxes to suit their particular circumstances. The fear of missing deadlines or incurring penalties should not be the primary or sole reason for choosing how to manage your tax affairs.
Being proactive about tax returns is the first step in ensuring that you do not end up making unnecessary overpayments on your tax. Regular tax reviews will ensure that effective ways to make savings are identified and implemented. If you break out in a cold sweat at the thought of tax or making a tax return then it may well be time to appoint an agent to work on your behalf. It will not only ensure that you have peace of mind but it will also open the door towards advanced tax planning and the minimising of future tax liabilities.
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