Tips for filling in your self-assessment tax return – and mistakes to avoid

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For many people, filling in their tax return is about as much fun as going to the dentist, but it’s easier if you don’t leave it until the very last minute. Follow these tips for filling in your self-assessment tax return.

Tips for filling in your self-assessment tax return

If you fill in a paper return, you need to send it in by October 31st. If you file it online, it must be submitted online by January 31st (and that’s also when you have to pay your tax by). If you’ve never filled in a self-assessment form online before, you may have to register online and get your activation code in the post. This code can take over a week to arrive.

Who needs to fill in a self-assessment tax return?

If you’re self employed, you have income from several sources, you’re a company director or you claim expenses above £2,500, you should be filling in a self-assessment tax return. Don’t assume that, just because you’ve not received one, you don’t need to fill one in.

SAVVY TIP: Ask yourself whether you received any taxable income in the last tax year (April 2018 – 19) that the HM Revenue and Customs may not know about. If the answer is ‘yes’, you should fill in a self-assessment tax return.

What income do you pay tax on?

Your earnings are taxable, if you don’t already pay tax on them through PAYE (pay as you earn), but there are many other sources of income that you could owe tax on:

1. Rental income from a property. Unless it’s under the ‘rent a room’ scheme, when up to £7,500 income from renting a room in your house is tax free.

2. Interest from savings. You get £1,000 in interest from savings free of tax (or £500 if you’re a higher rate taxpayer), but interest from savings above that is taxable.

SAVVY TIP: Remember that some investments, such as stocks and shares ISAs, and savings such as cash ISAs and Premium Bonds, are tax-free and you do not even need to tell HM Revenue and Customs that you have them. If you are on a low income, you can receive up to £5,000 a year in interest from your savings and you don’t have to pay tax on them.

3. Compensation payments. If you’ve received a payout from something like PPI mis-selling, it may already have had tax taken off, but it may not.

4. Dividends from share-based investments above £2,000. The only exception to this is if the shares or fund is held in a stocks and shares ISA. The first £2,000 in dividend income you get is free of tax, but you pay tax on anything above that. This fell from £5,000 on April 6th 2018.

5. Capital gains or losses from selling shares/investments. If you’ve made a profit or a loss from selling something like shares or a second property, you should tell HM Revenue and Customs. You get a capital gains tax allowance every year, which is £12,000 in tax year 2019 – 20 (and £11,700 in tax year 2018 – 19). Any profits below that are free of capital gains tax.

SAVVY TIP: The Gov.uk website has a section called who must send in a tax return, which is helpful.

When to register for self assessment

You should tell HM Revenue and Customs about a change in circumstances or any untaxed income, as soon as possible. The latest is 5th October after the end of the tax year that you needed a tax return in (so, if it was for 2018 – 2019, the deadline is 5th October 2019).

Registering to fill in your form online

The process of registering to fill in your self assessment form online is quite straightforward, but you must do this at least a week before 31st January at the latest – 10 days is better. This will give you enough time to make sure you receive your activation code in time. Register earlier if you can. You will need your unique tax reference (UTR) number and your postcode or National Insurance number.

SAVVY TIP: You’ll have been given a unique tax reference — or UTR — number when you registered for self assessment. If you’ve not done this, get in touch with HM Revenue and Customs straightaway.

1. HM Revenue and Customs will send an activation code. Once you’ve registered, you’ll be sent an activation code in the post.

2. You must use this within 28 days to activate your account. You don’t have to fill in and submit your self assessment form when you activate your account. You can activate it (choosing a password etc) and then file your return later.

Preparing to fill in your self-assessment tax return

Once you have decided to fill in your form; try and set aside enough time to do it without rushing.

  • Get together all your information. You can do this at the same time as you fill in your form, but it’s probably less stressful to do it in advance. That way if you’re missing any documents, you can get duplicates (from your bank, etc).
  • Get hold of last year’s tax return. Don’t rely on your memory. Instead, get hold of a copy of last year’s self assessment form and see where your income was coming from.
  • If you are really stuck and can’t complete your return for lack of some information, consider estimating the missing information so you can file your return on time. You should flag up that it is estimated and supply the correct information when you can, but this is allowed. Previously, you could sidestep the penalty for filing your tax return late by paying all the tax you thought was due and filing your return later. But HM Revenue and Customs has changed the rules so you will be penalised if you don’t file your tax return and/or if you don’t pay the outstanding tax by 31st January.

SAVVY TIP: Don’t forget to pay your tax on time! Filing your tax return is only half the task.

Reducing your tax bill

There are still legitimate ways to reduce your tax bill – some of which are positively encouraged by the government:

  • Making pension contributions. If you’re a basic rate taxpayer, tax relief (essentially a top up from the government) is given at the time but if you’re a higher rate taxpayer you can reclaim the extra tax when you fill in your self assessment form.
  • Charity giving through Gift Aid. If you make donations to charity you can reclaim extra tax relief if you’re a higher rate taxpayer.

Penalties if you don’t file your tax return

If you don’t file your tax return and pay any tax you owe by January 31st, you’ll be charged a penalty of £100. Once your tax return is three months late (after the end of April), you’ll be charged a daily penalty of £10, up to a maximum of £900. You’ll be charged £300 or 5% of the tax you owe (whichever is higher) once your tax return is six months late, and another £300 or 5% if it’s 12 months’ late.

You’ll also be charged a penalty on any tax you pay late. It’s 5% of the tax you owe after the first 30 days, another 5% penalty if tax is owing after six months and a further 5% if you still owe tax 12 months after you were supposed to pay the bill.

Related articles:

Tax relief on workplace pensions

Child benefit changes; if you or your partner earns over £50,000 a year, what should you do?

Giving away money while you’re alive – understanding the rules

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