Wednesday 28 March 2012

Preparing for the New Tax Year - Practical Tips

Keep Clear Records
Keeping clear records is a tax essential. If your records are clear (and complete!) then there is more chance that your tax return will be accurate and include full claims for all legitimate expenses. Furthermore, knowing you have been keeping clear records means you can worry less about how difficult a tax enquiry could be.

Write down every expense
Self employed persons are often surprised at the types of expenses that can be claimed against their income for tax purposes. Generally speaking anything that is ‘Wholly and Exclusively’ incurred for your trade can be claimed, but if you incur expenses and you’re not sure if you can claim for these, then write them down and ask your advisor as you may find that a claim is possible. If you don’t write it down then you will never know!

Finish your tax return as soon as possible after the tax year ends
This year almost 10% of taxpayers filed their 2010/11tax returns late or not at all and thus will have incurred an automatic £100 late filing penalty. Finishing your tax return well before the deadline not only means you avoid the penalties associated with late filing but will also mean that you have more time to prepare for any January bill, or you will be able to reclaim any tax due to you sooner. You will also stand more chance of remembering what that illegible scribble in your books means.

Make sure your employer has given you everything
Employees are annually issued with a form P60 to show their taxable earnings and tax deducted for the tax year. This form is indispensable for any employee completing a tax return and must be given to the employee by 31 May following the end of the tax year. However many employees are unaware that another form is also essential if they want their tax returns to be correct and complete. For any employees receiving taxable benefits in kind (i.e. company cars or medical insurance) or expense payments where the employer does not hold a dispensation, a form P11d should be issued to them by 6 July following the end of the tax year. The Revenue receive these forms directly from the employers so if an employee misses this from their tax return, then more than likely they can expect HMRC to get interested.

Don’t forget your bank interest
Self Assessment is designed to collect information on all of a taxpayer’s income, not just income from business sources. Bank interest from all accounts (but not ISAs) must be shown on the tax return. Banks send HMRC your bank interest details each year and if there is a discrepancy then HMRC may raise an enquiry.

Be generous
Make sure you tell your advisor about any charitable giving you have been doing during the year. Higher rate tax payers can get up to 30% gross tax relief just because they have donated money to a registered charity. This could mean up to £30 of tax saved for an £80 donation. A gift aid declaration should be made when donating the money and a copy kept in your file.

Don’t forget tax credits
Tax credits aren’t just for people on very low salaries or necessarily just for those with young children. H M Revenue and Customs provide an easy to use calculator which takes only a couple of minutes to complete, asks no difficult questions and gives you an instant result as to whether or not you are entitled to make a claim. You can find this calculator at http://taxcredits.hmrc.gov.uk/Qualify/DIQHousehold.aspx.

Avoid paying a lump sum in January
Anyone receiving income from a PAYE source and completing their tax return by the 30 December is eligible to have any tax they owe ‘coded out’ provided that certain limits are fulfilled. This means that instead of demanding a lump sum payment at the end of January, HMRC will include the tax due in your next PAYE coding notice and collect it gradually via your pay in the next tax year. Your advisor will be able to help you determine whether this is a viable option for you.

Don’t panic if you receive an enquiry letter
HMRC can raise an enquiry where they believe information on your tax return is incorrect. They can also raise an enquiry randomly, so don’t just assume that they know something you don’t. Enquiries are often best dealt with the help of an advisor but you can lessen the stress by adhering to our tip on keeping clear records.

See an Independent Financial Advisor
Independent Financial Advisers are able to give tailored advice regarding all types of financial strategies and investments. Ward Williams Financial Services offer a free initial consultation and include in their considerations any tax savings you could make.  Pension contributions, ISAs, Premium Bonds, EIS investments, VCT investments can all potentially save you tax, and our advisers are able to help set up all of these.

For further information/advice on this topic please contact our Ward Williams Tax team on 01932 830664 (Weybridge) 01895 830664 (Uxbridge) or visit http://www.wardwilliams.co.uk/

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