10 Essential Tax Return Tips

Income Tax Return Deduction Refund Concept

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Take the stress of completing next year's tax return away by starting today

Most of you know there has been a deadline extension to submit your self-assessment tax return to 28/02/22.  For some of you this must have been a massive relief. 

But what about if you weren’t bothered because you had submitted your tax return and knew how much you are due to pay months ago?  How much more relaxed do you feel because you haven’t had to rush to get anything done and work out how to pay your tax bill?

If you are not one of those lucky ones who sent off their tax return months ago, why not make next year’s return a bit different? Follow these 10 easy tax return tips and this time next year you will be sitting back and feeling smug, your last-minute tax return being one less thing to think about.

Hi, I’m Anna Goodwin, your friendly finance mentor. With over 30 years of experience, I know how important it is to know your finances and get your tax return done in plenty of time. 21/22 could be a year where you are much more relaxed about your tax return as you can do exactly that and get your tax return sorted early.

10 Tips to take control of your tax return

The key to sorting out your tax return early is to be organised and efficient. Here are some tips:

  • Do it sooner rather than later: the deadline is 31 January, and that’s a lot of time to feel anxious about not completing it. Get rid of that stress by sorting it out earlier.
  • Block some time in your diary, even if it’s just a few hours.
  • Start looking in all of the places your income and expenditure documentation is likely to be.
  • Gather all your income and expenditure together in one place. Download my FREE Business Accounting Template Pack, including templates for recording income and expenditure.
  • If you are aware that you are a higher rate tax payer (if you earn more than £50,270) you can plan and take account of the thresholds and the rates that you will be due to pay.
  • Remember the marriage allowance, if applicable. If one of you doesn’t earn enough to use up all of his/her allowance then 10% of their personal allowance can be transferred over to the other spouse.
  • The Self Employment Income Support Scheme (SEISS) income will need to be added as it will count towards your taxable income. Grants 1-3 in 20/21 and grants 4-5 in 21/22. Also, any rates grant you received. 
  • From April 2024, Making Tax Digital for Income tax is set to be brought in. This will fundamentally change how people look after their tax affairs and will mean that if your turnover is more than £10k then you will have to keep up to date.  You may find my blog on Making Tax Digital for Income Tax Self-Assessment
  • The total tax due is made up of two elements:

A settling-up payment for the previous tax year.

A payment on account, which is 50% of your estimated current year tax bill.

If you think your profits for 20/21 are likely to be lower than 19/20, you can ask for it to be reduced prior to submitting your tax return.

  • January is the busiest time for HMRC, so if you have any questions, make sure you leave plenty of time to ask them. Remember, it takes ages at any time of the year to get through on the phone, but this is a lot worse in January!

Get organised for your tax return

This is what you need to know to fill in your tax return. Get the information now in preparation for next year.

Types Of Income

Ensure that you have all of your income filed for the next tax year. 

Check whether you are missing anything. Do you need to request any bank certificates or are you missing any dividend certificates?

Make sure that you include all income; as well as employed and self-employed income, there are many other types, including:

  • Airbnb rental income
    • If you let out a furnished room of your main residence (or indeed the whole house), then if the gross rents received are £7,500 or less, this is all tax free.
  • Rental income
  • Partnership income
  • Pension
  • Dividends
  • Self-employed income
    • Network marketing such as Arbonne or Forever Living products
    • Private tuition
    • Being paid for work for someone else: friend, family or business contact

Interest Received

As a basic rate taxpayer, you can earn £1,000 of savings interest per year tax free.  For higher rate taxpayers, this decreases to £500.

Dividend Income

If you receive any dividends on shares that you own, then be aware that there is a tax free dividend allowance of £2,000.

Basic rate taxpayers pay tax at 7.5% on dividends.

Higher rate taxpayers pay tax at 32.5% on dividends.

Child benefit and earning more than £50k

Here are the steps you need to take:

  • Check your annual income on your P60 or your personal tax account.
  • Include any taxable benefits, for example, medical insurance, company car or accommodation.
  • Use the Child Benefit tax calculator.
  • To avoid a penalty, notify HMRC and register for Self-Assessment and submit a 2021 to 2022 return before 31 January 2023 and pay what is due.

Allowable Costs

If you are self employed, make sure you include all allowable costs.  In my experience, a lot of costs are not included as the documentation has been lost. File everything so it is easy to find.

Examples of allowable costs:

  • Materials
  • Subscriptions
  • Training
  • Motor Expenses
  • Travel and Subsistence
  • Insurance
  • Telephone and Broadband
  • Printing, postage and stationery
  • Bank charges
  • Home costs
  • Repairs
  • Legal Fees
  • Accountancy

 

As we near the tax deadline for this year, please think about how much better you would feel if everything was done and dusted.  What a relief!  No rushing about finding things and requesting information.  This can happen – it just means you need to make a plan now.  Good luck!

Next time, I will concentrate on how accountants can attract customers.