Many of you will have already filed and paid your self-assessment tax, but for others the deadline of 31 January is still looming. Have you done your Tax Return?
I thought it would be useful to give you some tips to help you get your Tax Return filed asap. I have included some of the Frequently Asked Questions I receive at this time of the year.
For those of you who have already completed your return, you will find this useful for next year.
Basically, I take the stress out of finances – both business and personal. From running my own business and helping others to run theirs, I know it’s important to tackle your self-assessment Tax Return early to reduce stress and plan accordingly.
Tax Return Tips
1. Is Airbnb rental income taxable?
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.
2. What about rental income?
Have a look at my blog on this subject.
3. Am I correct in thinking there is an allowance for interest received?
Yes! 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.
4. Are all dividends taxed at 7.5%?
No. 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.
5. I work for myself but get confused about what is an allowable expense in my Tax Return.
This is frequently asked when clients are completing their Tax Return, so here’s a list of some of the most common expenses which are allowable:
- Motor Expenses
- Travel and Subsistence
- Telephone and Broadband
- Printing, postage and stationery
- Bank charges
- Home costs
- Legal Fees
6. Am I correct in thinking that I need to do something as I earn more than £50k and receive Child Benefit?
Yes, you are and here are the steps:
- Check your annual income on your P60 or your personal tax account.
- Include any taxable benefits, for example medical insurance, company car or accommodation in their income.
- Use the Child Benefit tax calculator.
- To avoid a penalty, notify HMRC and register for Self-Assessment and submit a 2018 to 2019 return before 31 January 2020 and pay what is due.
7. I have submitted my Tax Return but don’t understand the amount I have to pay. I didn’t realise I had to make a payment on account!
- Yes, the payment is made up of 2 elements:
- A settling-up payment for the previous tax year.
- A payment on account, which is 50% of your estimated current year tax bill.
8. I understand now but can I reduce the payment on account as it seems high?
- Yes, 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.
9. How can I pay my tax bill?
HMRC accept many methods (including at the bank and a cheque through the post) but prefer to be paid electronically: Direct debit, faster payment, BACS, CHAPS, debit or corporate credit card.
- Note – you can’t pay by a personal credit card.
- Visit https://www.gov.uk/pay-self-assessment-tax-bill
10. I am glad to say that I have submitted my Tax Return but I don’t have enough money to pay the bill – is there anything I can do?
The best thing you can do is contact HMRC asap and ideally before the tax becomes due. HMRC are well aware that people may struggle to pay their tax this year and are often happy for you to make stage payments.
Don’t forget that you will need to include any additional support you received from HMRC during 2020 when you get around to completing next year’s Tax Return. Any grants are taxable so need to be included.
You will find lots of other useful stuff on my website, including a list of the 14 things your accountant needs from you and spreadsheets to help you log your business expenditure, mileage and income.
It’s easy to get in a panic when trying to get your self-assessment Tax Return sorted. But take some deep breaths and you will get there! In future, even if it’s something you really don’t want to do, start working on it earlier and this will make everything seem calmer and you will have more time to ask questions. My clients show such relief when they drop off their records and know they’ve sorted it all for another year!
Good luck! Get in touch if you have any questions.
Next week, I will concentrate on tackling any gaps you have noticed in your financial knowledge.