Tax Returns
From April this year there will be an overhaul in the self assessment system, making it vital to get your affairs in order by then. If you make a genuine mistake there will be no penalty, but if you deliberately understate your tax the fine rises to 70% or 100% of the unpaid tax if you don’t co-operate or act promptly.
In addition, from April the deadline for filing paper self assessment tax returns will be brought forward by three months – from the end of January to the end of October. Those who miss the deadline can expect a £100 fine, plus interest on any tax owed. Taxpayers who file their returns online will still have until the end of January.
So I’ve got a few tips to make things easier for both you and your accountant.
If you have a buy to let portfolio, switching to an ‘interest only’ mortgage has the advantage of making your tax return easier to complete. Buy to let borrowers get tax relief on mortgage interest payments, so you can set all payments on an interest only loan against tax. However with a repayment mortgage only part of the monthly payment can be offset. To check how much of your payment goes towards interest, contact your mortgage lender or broker.
As for pensions the government currently offers 22p for every 78p contributed to a pension. A higher rate taxpayer saving into a personal pension can claim a further 18p, but it can be easy to get it wrong.
You are supposed to include the gross figure – which is the amount you paid into a pension with basic rate tax added. So if you paid £780 you should enter £1,000. You then receive higher rate relief worth £180.
Those that were fortunate enough to take out life assurance in 2006 and bought a Life Assurance with Tax Relief plan are able to claim the same 18% as higher rate tax payers. Make sure you put in the correct figure on the return or advise your accountant accordingly.
If you’re in doubt about what to do, there’s lots of help available – simply contact HM Revenue & Customs directly, your accountant or your Independent Financial Adviser.
The figures above are for guidance only and reflect the position at the time of writing. Essential Money Limited is authorised and regulated by the Financial Services Authority.
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