Here’s how you can beat the tax return rush and have a relaxing end of January. If you’ve been putting off completing your tax return until the last minute, you’re in good company. So far only 3.5 million of us have got round to it, of the estimated 8.5 million required to do so. The only thing in favour of we procrastinators is the knowledge that at least we weren’t one of the 620 people who filed their return on Christmas Day!
With some 75,000 of us filing our returns online daily, that number is expected to rise significantly as the deadline of 31st January draws nearer. Unlike previous years, the deadline for filing a paper return is long gone – you’ll need to file online.
Here’s how you can beat the rush and have a relaxing end of January.
(These tips are particularly aimed at you if you’re self-employed, or in partnership. For you lucky Limited Company Directors out there, things are a little easier from your tax-return point of view, but you’ll have other, company tax deadlines to think about.)
‘Tax doesn’t have to be taxing’ – or so says the HMRC’s mantra. We know better, of course, but then we weren’t (most of us) destined to be accountants.
But it’s not rocket science, so if you can handle all the other tasks involved in getting your business up and running, you needn’t be scared of a few numbers.
The single most important thing to do to save your sanity is to commit to getting started – block out half a day in your calendar. Right now. Preferably before 31st January and make sure that time sacrosanct.
If you haven’t already got a UserID and Activation PIN for online filing, you’ll need to get your skates on. The HMRC recommend that you request these no later than the 21st January to have a hope of meeting the deadline. Visit https://online.hmrc.gov.uk/registration/individual to register.
Get your Paperwork together
We can’t all be as organised as we’d like, but you should at least have any employment information (P60), bank statements, your year’s sales invoices and expense receipts in some kind of container. If that’s a carrier bag, so be it.
For most home-businesses, the sales (invoices) side of things is pretty straightforward, but working out what expenses are allowable against tax is not always so easy.
As a rule of thumb, if you really did incur that expense, hand-on-heart, wholly for your business, it’s probably OK.
If your turnover (total sales) was below £64,000, you’ll only need to fill in the short version of the self-employment form (SA103S) rather than the full version (SA103F), which means less detail about your business is required.
If your turnover was below £30,000, you’ll have an even easier job as you won’t even need to separate out your expenses into different categories – just the three key lines of turnover, expenses and profit.
Don’t forget to add in your mileage (the easiest way of accounting for car expenses is 40p for the first 10,000 miles and 25p thereafter) and, if you work mostly from home, a proportion of your home-running costs.
Rare examples of disallowable expenses are those related to business entertaining (spoilsports) and depreciation on equipment and cars (although you’ll be able to claim Capital Allowances instead).
Check out more detailed advice here http://www.hmrc.gov.uk/incometax/relief-self-emp.htm, and in all of these matters, if in doubt speak to a friendly accountant – if only they weren’t in such short supply at this time of year!
File On Time
Last year the HMRC online filing servers were brought to their knees by the last-minute rush, and as a result a deadline extension of one day was granted.
Don’t assume the same will happen this year: if it’s later than midnight on the 31st January you can expect to receive an automatic £100 penalty.
Pay on Time
You definitely need to pay tax owing from 2007/8 on time too, or face a surcharge.
Don’t forget you’ll probably need to make payments on account for next year, normally two equal payments of exactly half what you paid for this year although you can apply to have them reduced if your circumstances have changed.
Resolve to be more organised next year!
Online systems like SamsTax (http://www.samstax.co.uk) or FreeAgent (www.freeagentcentral.com) really do make it easy to stay up to date with your bookkeeping, and even keep surprises to a minimum by forecasting what your tax bill is going to be. Just think, you could spend January 2010 in an altogether more relaxed frame of mind!