Tax returns: some useful tips as the deadline approaches

With only days to go before the 31 January deadline for filing tax returns, if you are one of the 9 million who have received a self assessment form, you had better move fast. Those who didn’t send in a paper return by the 31 October deadline of last year will now need to file online.  If you haven’t registered, don’t delay as it takes several days for the registration to become active and there is an automatic fine of £100 for missing the deadline.

It can take up to seven working days after registration before you receive your activation code and you will need either your postcode or National Insurance number, plus your Unique Taxpayer Reference (UTR) number which can be found on correspondence from HMRC, or by contacting your local tax office. HMRC advises new users to register by 21 January at the latest. Full details at www.hmrc.gov.uk. If you’ve filed online before, make sure you have your User ID and password to hand. It can take seven working days to get replacements, so check now.

Who it affects

Not everyone has to complete a self assessment tax return but around 9 million are sent out each year to the self employed (many of whom will have an accountant to deal with it) higher rate taxpayers, anyone who has a new source of income for 2009-10, company directors, those with investment income or capital gains and people with income from abroad. 

People who receive a new source of taxable income must notify the taxman within six months of the end of the tax year – so if you come into this category you should have done this already.  If you belong to any of these groups and haven’t yet received your tax return, get in touch with the tax man immediately. 

What you'll need

However depressing it is, tax returns must be filed so get together the documents you will need such as your P60 and P11D, if you are employed, bank certificates of interest paid, pension providers’ certificates of payments and tax deducted at source, receipts for dividends paid on shares – and of course a full statement of income and outgoings for buy-to-let or other property investments.   

Many buy-to-let investors who are caught out by the tax man claim that they didn’t think they needed to declare rental income because it was wiped out by the mortgage payments on the property.  Even if this is the case, you must still make a declaration. ‘Overseas income and mistakes on self-employed accounts often result in wrong submissions,’ warns Jane Moore from the Institute of Chartered Accountants for England and Wales (ICAEW) Tax Faculty.  And she reminds taxpayers not to forget items like ‘deductions such as gift aid donations and pension contributions.’

If you filed a self assessment form last year compare it with this year’s return to see if you have left anything out.  Have you any realised gains - or losses which can be carried forward to future years?  ‘If there are any significant changes explain why on the form. There is white space where you can make notes which will help to avoid unnecessary queries from HMRC later,’ Moore advises.

Keep records

Given that HMRC is dealing with millions of tax returns the likelihood of things getting lost is quite high.  Make sure you save everything including a copy of all the receipts and documents plus a copy of the receipt you will receive from the tax man to say your return has been received. ‘You must keep records of all information used to complete your tax returns for 22 months after the end of the tax year or for five years and 10 months for those with a business or income from letting out property. There is a maximum penalty of up to £3,000 for each tax year for which records have not been kept,’ Moore warns.

Very few people who don’t use an accountant seem to know that you can consult a firm for advice on a one-off basis. You don’t have to use them every year. For example, if you have a complicated capital gains tax situation regarding the sale of a second home or buy-to-let property, it is perfectly possible to consult an accountant on a one off basis – either for advice on a specific issue or to complete your return for the year in which you have the problem. 

The good thing about using an accountant is it gets the tax man off your back. If your affairs are straightforward you shouldn’t have to pay more than £200 or £300 for the service. You can find information on accountants at www.icaew.com/tax and there is a mass of guidance on filling in your tax returns at www.hmrc.gov.uk and at many other internet sites.