Six things you should know about self-assessment tax returns

Nothing in life is certain but death, taxes and the fact that, even when you’ve had months to put together your self-assessment tax return, you’ll still try to file it at 11.49pm on 31st January.

Here Nutmegonomics provides a handy amateur guide to self-assessment tax returns, saving you time, stress and maybe even money.

1. More people than ever have to file one. According to the Office for National Statistics, the number of people registered as self-employed rose to 4.2 million by the end of 2012 – the highest since records began in 1992. Overall, around 9 million people are required to complete a self-assessment tax return every year. As well as the self-employed, they include: directors of limited companies; anyone earning more than £100,000 a year; anyone with pre-tax investment income of more than £10,000; Lloyd’s “names”; ministers of religion; and trustees of anyone who’s died.

2. Do it on time. HMRC takes a dim view of people who can’t be bothered to stick to their deadlines. A life-threatening illness or the recent death of a partner are accepted as valid excuses; the dog eating your train receipts is not. If you file your return late, you’re automatically subjected to a £100 fine. If your return is more than three months late, you’re fined an additional £10 per day, up to a maximum of £900. And if you twiddle your thumbs for a whole year, you’ll be fined another £300 or 5 per cent of the tax due, whichever is higher. The deadline for paper tax returns is 31st October, the deadline for online returns 31st January.

3. If you’re self-employed, you can claim lots of things against tax. If you work from home, you can claim a proportion of costs such as lighting, heating, mortgage interest and cleaning. You can also claim for business trips and a proportion of running costs for a car.      

4. Don’t get carried away. You can’t, however, claim for life insurance, home extensions, travel between home and the workplace or a 1st class plane ticket to Bali in which you spent the first five minutes idly scribbling a business plan on the back of the cocktail menu.

5. Talk to HMRC. Despite their scary advertising campaign, HMRC tend to be jolly friendly, as long are you’re trying to do the right thing. And don’t forget that you can apply to reduce any payments on account if you expect to earn less this year than last. You can also carry forward losses from one year to another.

6. Think about getting an accountant. Not only will a good accountant save you tax, they also give you peace of mind and bragging rights over your less organised friends. What’s more, their cost can be written off against tax. According to a survey by the Guardian in January 2013, accountants typically charge between £150 and £250 for filing your self-assessment tax return.  Some online services even charge as little as £50, although as with most things in life, you get what you pay for. Check that your accountant belongs to a reputable professional body. The Institute of Chartered Accountants in England and Wales  has a search function at www.icaew.com

Did you think this was useful? Sound off in the comments box below.

Sources and useful links

www.which.co.uk/money/tax/guides/tax-returns/

www.guardian.co.uk/money/2013/jan/12/find-accountant-tax-return-how-much-pay

www.icaew.com

This blog was originally posted on the nutmeg site: http://t.co/GcZ7O5l

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