Personal Finance – Relaxed returns

Mahmood Reza offers some tips to help reduce the annual stresses of the individual tax return
The tax return season is now getting into full flow and by the end of next January, approximately nine million tax returns will have been sent into the tax office. It is mainly the self-employed, higher-paid employees, company directors and those that receive untaxed income who will need to fill in a tax return.

Increasingly, people will need to consider whether to complete a paper return or to submit the return online through the HM Revenue & Customs (HMRC) website. For those who prefer the Internet route you need to log onto the HMRC site http://www.hmrc.gov.uk and register for the service. If the paper route is chosen, make sure all the relevant pages are included and that a photocopy is made.

A checklist is a good starting point: identify what sources of income and gains you have for the year  for example, employed, self-employed, bank interest, etc.  and then consider what documents you have and need. The figures that are entered onto the return should ideally be verifiable and based on good records. A return should be prepared on the assumption that it will be investigated.

Make sure all records are kept together, for example P60s, P11ds, and bank and building society statements. The majority of tax investigations begin by looking at the standard of the taxpayers record-keeping.

There are a number of key dates in the tax filing calendar. If a paper return is being filed then it must be sent in by 30 September 2006 if you wish the tax calculation to be done for you or have any tax owed (under £2,000) collected via your PAYE code. If filing via the Internet, then the requisite date is 30 December 2006. The normal final deadline to submit the returns and pay any tax due is 31 January 2007  if penalties are to be avoided.

Common mistakes that are made include:
” Failure to complete a separate Supplementary Page for each individual employment
” An incorrect claim for personal pension premiums
” Entering in pay but not the tax deducted
” Claiming Capital Expenditure instead of Capital Allowances, and
” Failure to complete all of the self-employed pages correctly.

Other mistakes include a failure to sign and date the return and entering notes on the return such as “information to follow” instead of entering actual figures.

By starting the return early and maintaining accurate and organised notes and files, it is possible to highlight and rectify any information deficiencies. Early work on the return will also give time to access any necessary advice and support (and prepare for any outstanding payments)  and, ideally, keep stress levels to a minimum.

Mahmood Reza is Proprietor of Pro Active Accounting.
t: 0116 224 7122; e: [email protected]