Just starting on your self-assessment tax return of making the final checks? The clock is ticking! 23:59 on 31 January 2023 is the deadline for the 2021/22 tax year return. With time pressure comes mistakes, so here’s CRM’s guide to getting your self-assessment tax return right, including the latest items to remember to include.
Most mistakes occur because people don’t fully understand what the form is asking for, especially around the areas of dividends, savings, property and pensions. Just a small mistake can have a big impact on future payments and penalties.
Keeping good records is vital to submitting a smooth return – if you can lay your hands on the receipts, invoices, mileage tracking, benefits, bank and pension statements, it can make for a less bumpy ride. And of course, digital accounting software can help with this by recording what you need throughout the year.
SEISS Covid Grants
It seems like some time ago that the government was handing out grants to help self-employed people get through the pandemic, but now the chickens have come home to roost. SEISS grants were payments made by the government to businesses that were affected by the pandemic. As grants, not loans, the money was not required to be paid back, but were subject to income tax and National Insurance.
Don’t forget to include the fourth and fifth Self-Employed Income Support Scheme grants, if you applied and received them, on your 2021/22 return. The first three grants should have been included in your 2020/21 tax return. SEISS grants should be included on the ‘other tax adjustments’ section of the Self-Assessment return, where there is a specific box to complete and not included in your normal business turnover figure. Importantly, you should satisfy yourself that you were in fact entitled to these grants, and if not to repay them.
CRM’s top tips for a successful tax return
1. Time to Pay Facility
Spread the cost of your tax bill over 12 months by direct debit with HMRC’s Time to Pay facility. This must be set up within 60 days of the deadline and your bill needs to be less than £30,000. Interest is applied on the balance after February 2023.
2. Pension Tax Relief
Some personal pension plans and some auto-enrolment pension schemes (NEST, for example) operate a ‘relief at source’ system where higher rate taxpayers can claim the extra relief they are due. Many higher rate taxpayers are missing out on this relief.
3. Child Benefit
If one or both parents earn more than £50,000, they do not qualify for Child Benefit and overpayment is taken back on a sliding scale. If you pay more into your pension or gift aid, you may be able to reduce your net income below the £50,000 threshold.
4. Capital Gains and less common income sources
There are nasty penalties for failing to declare relevant income and Capital Gains such as:
- Employment income – including Benefits in Kind on P11Ds
- Maternity/paternity pay, sick pay and other benefits
- Pension income – remember that state pension is generally paid every 4 weeks, not monthly, so you will likely have 13 payments not 12
- Interest, savings dividends, investments and trusts
- Employee share schemes
- Dividends
But you don’t need to declare interest, bonuses or dividends from tax-exempt investments like ISAs, NS&I certificates, Premium Bonds, gambling prizes, Save As You Earn schemes or court-awarded damages. Don’t forget that if you have declared a gain on a residential property via an in year return, this still needs to be included on your annual tax return to assess whether the tax paid at the time is too much, not enough, or just right.
5. Marriage Allowance
Don’t forget you can transfer £1,250 of your personal tax allowance to your husband, wife or civil partner to reduce your tax bill. This can be applied if one partner pays no income tax or has an income below the £12,500 personal allowance and the other partner is in the basic tax rate bracket.
6. Charity Donations
If you made donations to charities, are a higher rate taxpayer and ticked the GiftAid box, you can claim the difference between the basic rate and your tax rate on your tax return. The amount of relief is calculated on the form and can soon add up. This doesn’t apply to charity donations you make via payroll giving as this is calculated at source.
7. Eligible Expenses
Check carefully which expenses can be deducted within your tax return to avoid costly penalties. Checking with a tax expert may show you things that you’re not claiming which could cut your tax bill.
If this year’s tax return has caused a mighty headache, you should really consider getting an accountant to do it for you next time around. An experienced accountant will help you make sure that everything is included correctly and on time. Contact CRM on 01865 379272.