Tax return pitfalls
We’re now into the 2014/15 tax year, which must mean it’s time to start thinking about the joy of completing your 2013/14 tax return! Many contractors will leave this task to their contractor accountant, but if you do complete it yourself you should be mindful of a few common mistakes. Here’s our lucky top 13.
- A tax return is a summary of all income received during a year, regardless of whether or not it has already been taxed. Make sure to include bank interest and other taxed income as it can affect the rate of tax you pay on your untaxed income. You can however ignore an ISA.
- If you had a student loan with a balance outstanding during the year make sure you include it. You will need to repay the loan at the rate of 9% on any income above £16,365, so check now to see if you’re better off simply repaying the loan in full – the tax return will calculate the 9% regardless of the loan balance, and it’s a long process to get any overpayment refunded.
- Do you own a property and receive rental income, but make an overall loss? If so, make sure it is included so that HMRC are aware you have losses to carry forward against future profits.
- If this is your first year of filing a tax return, have you got a Government Gateway account, and registered for Self Assessment? If not, do it now. It can take weeks to set up, so leaving it to the last minute could mean you’re unable to file on time.
- Do you want your tax collected through your tax code? Make sure you file by 30thDecember (not the 31st!)
- Changes to the Self Assessment system in 2013 mean that you now have to declare Child Benefit if you or your partner earn over £50,000. Make sure you know the rules of who has to declare and repay the benefit.
- If you were in a Partnership during the year make sure you file a return for the Partnership itself too. If you don’t, it will be subject to a £100 late filing penalty just like an individual would.
- Have you included all employments during the year? One of the common mistakes we see with new contractors is that they include their own company income but forget to include the details from their old employer (check your P45 for the information you’ll need).
- Remember that dividends are received net of a 10% tax credit and must be grossed up before being added to your return. A dividend of £1,000 is actually £1,111 with tax paid of £111.
- Did you receive Jobseekers Allowance or other taxable benefits in the year? Make sure these are included too. You should have a P45 or P60 from the Job Centre with the details.
- Do you pay into a personal pension? Include the details on your return and it will increase your basic rate tax band, potentially decreasing the tax you owe. Be careful though, pension contributions made by your employer do not get included here.
- Donations to charity also increase your basic rate band and should be included on your tax return. If you’re not a UK taxpayer though you should check whether they are being made under the gift aid scheme, as you’ll be liable to pay the tax on the donation if they are.
- If you owe tax for a prior year make sure it’s included on your return, otherwise HMRC could refund you only to ask for it back later, which confuses things all round.
Remember that even if you do ask a contractor accountant to complete the return for you, it’s still your legal responsibility to check it is correct as you will be the one held accountable for any errors or omissions. Review the return and check it through before you sign it!
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.