By Dearbhail McParland, Associate Director Ross Boyd Limited
31 January is only a couple of weeks away and many taxpayers have still to complete their tax return. If that includes you action is required. Here are some tips
1. Submit on time to save penalties
The deadline for filing your 2013-14 tax return online is 31 January 2015. The deadline was 31 October 2014 for a paper filing and so if you have not already completed your return you must file online. If HMRC do not receive your return online by 31 January 2015 you will receive an automatic £100 penalty. After that the penalties can escalate quite quickly with £10 per day penalties commencing if your return is more than 3 months late.
If you have not registered online you should do this as soon as possible as it can take time to get the relevant codes and reference numbers for online filing.
2. Make sure you claim the right expenses
The general rule is that all expenditure incurred wholly and exclusively for the purpose of the trade are allowable for tax relief against income earned in your business.
HMRC’s helpsheet on “How to calculate your taxable profits” includes a reminder of the typical expenses that maybe relevant for your business.
Using a qualified tax adviser or accountant will help you ensure that you meet all your legal obligations. In many cases they can help you reduce your tax liability by ensuring all relevant expenditure is claimed.
3. Ensure you count tax already paid
If you receive bank interest and you are not registered to receive your interest gross, 20% tax will usually have been deducted at source and this should be claimed back on your tax return.
Your bank will generally have sent you an interest certificate after 5 April 2014 or they may detail your interest receipts on your bank statement or savings book. Ensure that you include the correct gross or net figure when completing your return. Check with your bank if you are unsure.
4. Utilise mileage allowance payments for your car
If you use your own car for business purposes and an employee you can claim 45p per mile for the first 10,000 miles and 25p per mile thereafter. If you get reimbursed for less than these figures, for example 40p per mile, you can claim relief for the balance on your tax return.
If you carry a passenger your employer can pay an additional 5p per mile tax free but you cannot claim this on your return unless your employer is paying it.
5. Get relief from donations
When you make a donation to charity they will be able to claim back basic rate tax on the amount donated, if you confirm that the payment is being made under gift aid.
If you are a higher rate tax payer you can claim additional relief at your highest rate, either 20% or 25%. If you pay no tax this year you will have to pay the amount that the charity has claimed back.
6. Avoid interest charges for being late
Pay your tax on time to avoid interest charges on the amount you owe. If you have not paid your balancing payment 28 days after it is due then you will be charged a 5% surcharge on any balance owing. If this is still outstanding six months later a further surcharge will become due.
If you are unable to pay your tax on time contact HMRC and seek a time to pay arrangement. Interest will still be charged but you may be able to avoid the 5% surcharge if an arrangement is agreed and adhered to.