Filing your end of year tax is a legal requirement. This means that should you fail to do so, you run the risk of attracting penalties or even facing legal repercussions. Not many are excited about filing tax returns as it can be a tiring or even confusing process. It requires time and concentration since it is very easy to make a mistake. HMRC will usually use the information you provide to work out how much tax you need to pay or whether you need a refund. Here are some handy tips to take into account as you do your end of year tax returns.
It is important to know and understand tax requirements. One of this is self-assessment. For example, individuals who pay tax directly via the Pay as You Earn (PAYE) system do not need to self-assess. Self-assessment is needed for those who have complex arrangements such as those who are self-employed, workers who earn more than £100,000, those who are supposed to declare taxable gains such as landlords and directors of companies among others. Another condition that will make you eligible for a self-assess is if you or your partner's income was more than £50,000 and one of you made a child benefit claim. If you are not sure you need to self-assess, then you can visit the HMRC website where there is a handy and simple tool that allows you to know if you need to self-assess.
If you have never filled a tax return before, then you will be required to register at the HMRC website. It may take up to 20 days if it is your first time to get the activation code. You will then be required to activate your online account by entering the unique taxpayer reference number sent to your address. You are required to activate your account within 28 days, otherwise you will be required to request another taxpayer activation code.
When filing your tax returns, having all the relevant documents will make the process fast and easy. You will be required to complete the P60 statement which relates to your employment information such as the summary of your income and any tax deductions from your income. You will also be required to detail the benefits paid to you and the expenses in the P11D statement. You should also ensure you have documents which detail any other sources of income and investments you may have. However, HMRC will have some information that it fills on behalf of the taxpayer and thus there is no need to spend time filling it in.
You should also take into consideration the penalties you will have to pay. If you fail to submit your returns by the deadline, you will be required to pay a £100 penalty and you will also incur a £10 penalty each day after three months if you still have not submitted your returns. However, if you have genuine reasons as to why cannot file your returns on time, you can raise them up with HMRC to see if they will take them into consideration and avoid penalizing you. If you have investments and savings that qualify for tax reliefs, then you should enter them. As you are filing your self-assessment, you will be guided on where you can find the information they are asking for such as information found in your pay slips, P11D or P60. As you fill the required information, the tax you are supposed to pay will be calculated automatically. If you make any mistakes, it will be highlighted and you will be prompted to change it. You do not have to fill the form in one sitting. You can always save it and come back to add additional information later. After filing all the required information, it is advisable to double check to see if everything is correct. You will then receive a reference number after you have submitted your information. Should you have any problems, you can get in contact with HMRC to help you sort out any issues you may have.