With the self assessment tax return deadline approaching at the end of the month, Gill Philpott, CTA TEP, Tax and Trust Specialist at Ascot Lloyd, provides her top 10 tips and reminders.
Tip 1: Check if you need to do a self assessment return in the first place
It is not always necessary to complete a tax return to pay tax on untaxed income. You can check if you need to file a self-assessment return at https://www.gov.uk/check-if-you-need-tax-return. If a tax return is not required, HMRC will still need to be told about any tax due and you will need to arrange for this to be collected or paid.
Tip 2: Make sure you register in time
If you do need to complete a return, you only have until mid-January to register for self assessment. You will need a government gateway account, if you do not already have one, and the process to register for this can take about 10 days. The tax return will need to be completed online as the deadline to file a paper return was 31 October 2019. Failing to file or pay on time will generate penalties and late payment interest charges. Technically the date to let HMRC know you needed to file a return was 5 October last year, but if all the tax is paid by the due date then HMRC are less likely to impose a penalty for late notification.
Tip 3: Don’t forget that the changes to the dividend allowance may impact you
The dividend allowance, the band in which dividend income is taxed at 0%, was reduced to £2,000 in 2018/19, from £5,000 in 2017/18. If, when added to your other taxable income, your dividend income takes you over the personal allowance and the dividend income is over £2,000, you will need to let HMRC know as tax will be due.
Tip 4: You can ask for your PAYE code to change to collect tax in the coming year
It can be possible to receive up to £10,000 of dividend and investment income without the need to file a tax return. If tax is due contact the HMRC helpline and ask them to change your PAYE code to collect the tax over the next year from your wages or pension. If this is not possible you will need to pay HMRC by 31 January 2020 to avoid late payment penalties.
Tip 5: Check the details on capital gains tax
Any gains over the capital gains tax annual exemption of £11,700 or proceeds over £46,800 will need to be reported on your tax return. If you have not been issued with a tax return but have reportable gains or proceeds you will need to let HMRC know, you can do this by using the HMRC real time information service.
Tip 6: Claim your reliefs and allowances
When looking at your tax position, don’t forget to claim reliefs and allowances that are available. These include personal pension contributions paid by higher rate tax payers, charity donations, and the marriage allowance if one of a couple earns below the personal allowance and the other spouse/civil partner is a basic rate taxpayer.
Tip 7: If you have been issued with a return, don’t ignore it
If HMRC have issued you with a return, even if you have no untaxed income or tax due, you will need to file the return or HMRC will issue a penalty. You can contact HMRC to explain your circumstances and they may withdraw the return, which will remove any penalties charged. However, HMRC can insist the return is filed so they can review your tax position.
Tip 8: Beware of estimations in P800 calculations and Simple Assessments and get them corrected
HMRC may have removed you from self assessment and instead issued you a Simple Assessment, or, if you receive pension or salary, issue you with a P800 calculation. These are the HMRC’s calculation of your tax position for the year. You will need to check them, particularly if you have income other than state pension, other pension or employment income as HMRC may have estimated your other income figures. If the figures are wrong, you will need to contact HMRC and get these corrected. Any tax payable under the Simple Assessment regime for the 2018/19 tax year is due by 31 January 2020.
Tip 9: Use this time to check if you are due back overpaid tax
The tax deadline is not just about ensuring you are paying what you owe. It is also an opportunity to see if you are owed money back. You don’t need to complete a tax return to get back overpaid tax. This can also be done by submitting a form R40 or contacting HMRC.
Tip 10: If you are unsure, then seek advice
Tax rules change and each person’s circumstances will be different. If you are not sure of what you need to do, professional advice should be sought.