Top Tips for Tax Returns: What You Need to Know, and How to Protect Against Enquiries
The deadline for getting your Self-Assessment Tax Return (SA100) is nearly upon us, here are some top tips for dealing with last-minute filing – what you shouldn’t forget, and how to protect yourself against enquiries from HMRC, read the Tips for Tax Returns below:
- Make Sure You Have Your Unique Taxpayer Reference Number
Online filing of a tax return is not possible without a Unique Taxpayer Reference (UTR), and you must register with HMRC in order to obtain one.Apply as early as possible, as after registration it can take up to 10 working days (or 21 working days if abroad) for your UTR to arrive.
- If You are Employed, You Need Your Employers PAYE Reference
If you don’t have or don’t know the Pay as You Earn (PAYE) reference for your employer, the current guidance is to use ‘000/N’ to enable your return to be filed.Generally, however, the reference will appear on correspondence from the tax office, or you can find it on any P45’s or P60’s – the reference is comprised of two parts, a three-digit HMRC office number, and an alpha-numeric section that’s unique to the business (for example 123/AB456
- If You’re Estimating Figures on Your Return, You Need to Declare It and Why
If you’ve not got the final accounts for your business yet, it’s okay to use estimates – provided that you tell HMRC that you’ve done so, by ticking the estimates box.You also need to provide an explanation as to why you’ve used these estimates, in order to avoid later penalties or discovery assessments. There is a high risk of penalties for deliberate error if you – fail to provide actual figures, delay in providing figures, or if it transpires that you were using estimates because you were too disorganised to file your tax return on time.In short, to avoid penalties, if you use an estimate, you need to ensure you have a reasonable excuse for not providing the correct figures in time.
- Be Careful How You Make Use of ‘White Space’ on the Return and On Any Additional Pages
The main SA100 Return and additional pages (Capital Gains, Employment, etc), all have ‘white space’ boxes, which allow you to provide more details to HMRC.These can be used for areas of doubt, to ensure HMRC have the full details they need, and to protect you against discovery assessments.
Careful consideration should be given to what you include here – as it’s classed as being part of the tax return, and penalties can be raised against inaccuracies in the same way as if the boxes of the return have incorrect figures in them.If you are charged a penalty or informed of a discovery assessment against you, you need to be aware of how to appeal, and what time limitations you have.
- Include All Income Whether Remitted or Deemed Domicile
The Remittance Basis ceased to be available from 6 April 2017 for those who were deemed to be domiciled in the UK on that date or have become domiciled since then.All income and gains must be included on your return, whether remitted or not.
- Adjust Your Figures to Take into Account the Cost of Working from Home
If you are self-employed and working from home, you can claim all costs that are incurred for business purposes, as well as a proportion of all the other costs of running your home, such as lights, heat, insurance, council tax, repairs, cleaning, and mortgage interest.There isn’t a set method to apportion these costs – it depends on what work is being carried out in the home.
From 6 April 2014, taxpayers have been able to claim a monthly fixed rate allowance for home working, based on the hours they’re working at home – instead of making claims for actual expenses.
- Make Adjustments that Account for Private Usage
Self-Employed individuals must adjust their expense claims for the private use of vehicles, properties, and any other relevant assets.If your vehicle is used partially for private purposes, then you need to make a tax adjustment to disallow a proportion of the running costs (those that cover the private use), as it’s not a business expense.If you disallow a proportion of the running costs, then you must also adjust your claims for capital allowances too. Assets that have mixed usage (business and private), must be pooled separately from your other assets. This can be beneficial as it ensures balancing allowances are available upon disposal.
- Beware of the Annual Allowance Taper for High Earners and Those with Large Pension Contributions
Ensure that occupational pension contributions are correctly classified as either ‘relief at source’, or ‘net pay arrangement’ contributions – as these have different reporting and tax consequences.
- If You Have High Income Benefit Charges, This Needs to Be Filled in on the Return
You’ll need to complete this section if:
– Income is over £50,000
– Child Benefit has been received by you, your spouse, or partner
Changes in income due to COVID-19 may affect whether the charge applies, however.
- Income from Trading or Property Needs to Be Reported
If income from trading or property is below £1000 per annum, you’ll need to check if the Trading and Property Allowances apply to you.
If so, you may not need to complete the Self-Employment pages, and/or Property pages of the tax return, depending on your circumstances.
- If You Own Residential Property, You’ll Need to Be Aware of Capital Gains Tax
Residential property gains are taxed at the Higher Rate of Capital Gains Tax (CGT), between 18% and 28%.
From 11 March 2020, the Business Asset Disposal Relief Lifetime Allowance is reduced to £1million.Lettings relief is restricted for disposals after 5 April 2020, to periods where the tenant was in shared occupancy with the owner. This applies retrospectively – periods that may have been exempt in a pre-April 2020 disposal may not be exempt after April 2020.
Finally, don’t forget to follow up – items spotted during the tax returns process can result in amendments being required to previous years’ Self-Assessment returns, or on previous VAT or PAYE returns – as well as a requirement for voluntary disclosures to be made to HMRC.
And if you’ve used estimated figures, these should be adjusted to the final amounts as soon as they’re available, to avoid potential fines, fees, or penalties.
And those are the Tips for Tax Returns we would suggest using, or you can never worry again about needing tax return tips by leaving them to an expert such as Yorkshire Accountancy, if this shoulds interesting to you then why not book a discovery call?