Mastering the Tax Return: The Ultimate Guide to Success

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Mastering the Tax Return: The Ultimate Guide to Success

Article Published: July 17, 2023

The Tax Return can be a daunting task for many, but with the right knowledge and guidance, you can navigate through it successfully.

In this guide, we will walk you through the basics and demystify the concept of self-assessment. From understanding if you need to complete a self-assessment tax return to registering with HMRC and important deadlines to keep in mind, we’ll provide all the information you need. We’ll also discuss how to pay your self-assessment tax, how to get a refund if applicable, and shed light Payments on Account. Get ready to achieve tax return success!

Tax Basics

Having an understanding of tax return procedures is vital to ensure a seamless filing process.

It is crucial to be aware of the key deadlines for filing and making payments in order to avoid penalties and interest charges. To streamline the process, it is advisable to gather all the necessary documents and information well in advance. Utilising reputable tax software or seeking professional assistance can provide expert guidance and ensure accuracy in your tax return.

Remember the UK tax year runs from 6th April one year to 5th April the following year. If you are UK resident for tax purposes you have to report your worldwide income in your UK tax return. Any tax paid in the UK or elsewhere in the world will need to be included in the return and the tax calculation.

What is Self Assessment (SA)?

Self Assessment (SA) is a UK system administered by HM Revenue and Customs (HMRC) to gather Income Tax, some types of National Insurance, some types of Capital Gains Tax, sometimes student loan deductions and sometimes the Child Benefit higher income charge. It mandates individuals, including self-employed, company directors, high earners, and those with intricate tax situations, to report their income, gains, and financial information for a specific tax year. It is nothing to do with VAT or a limited Company.

Do I need to complete a Self Assessment tax return?

The requirement to complete a Self Assessment tax return depends on your specific situation. You would need to complete a tax return if you are self employed, in a partnership or earn more than £100,000 a year.

You may also need to file a tax return if you have untaxed income in the form of rental income, interest, dividends or foreign income. If you are UK resident for tax purposes you need to declare your worldwide income on your UK tax return. If you want to claim some Income Tax Reliefs such as giving to charity, putting money into your pension or making a tax efficient investment you would also need to file a tax return. Also, if you’ve make a tax allowable loss you would need to make sure HMRC know about it, in order for you to claim relief for it at a later date.

If unsure, seek advice from a tax professional or consult official government guidelines. Failure to comply with the requirement can lead to penalties and fees imposed by HM Revenue and Customs.

Registering for Self Assessment with HMRC

If you are required to file a tax return you must first register with HMRC. This requirement applies to anyone who falls into one of the other categories described above. The process of registering is relatively simple and can be done online through the HMRC website. Provide your personal and business details accurately to ensure smooth registration for self assessment return. It is crucial to complete the registration as soon as possible to avoid penalties for late registration.

Once registered, you will receive a Unique Taxpayer Reference (UTR) number, which you will need when filing your tax return. Don’t forget to keep your UTR number safe as it will be required for future transactions with HMRC.

We do this for our clients where it is needed.

Asking HMRC to withdraw a tax return

This scenario can occur when you have received a notice to file a tax return from HMRC. But your circumstances have changed – meaning you no longer fall within the scope. For example, you are no longer self employed and all your income for a full tax year, now comes from employment.

In order to proceed with the withdrawal, it is essential to directly get in touch with HMRC. You would need to provide a clear explanation of the reasons behind your request. Acting swiftly upon receiving a notice to file a tax return is crucial to avoid potential penalties or fines. HMRC will examine your request and decide whether the tax return can be withdrawn.

We do this for our clients if we have agent authorisation in place. Agent authorisation allows us to speak directly to HMRC on your behalf.

Important deadlines and dates for Self Assessment

Meeting the deadlines and important dates for your Self Assessment tax return is vital to avoid penalties and fines. Stay organised and be aware of the following crucial dates:

The tax year runs from 6th April one year to 5th April the following year.
The deadline for filing your Self Assessment tax return is January 31st following the end of the tax year.
Payments for any tax owed are also due by January 31st. If you are in the Payments on Account regime, you will have an additional tax payment deadline on July 31st.
Late filing penalties commence at £100 and increase with the duration of the delay.
If you are filing a paper return, the submission deadline is October 31st following the end of the tax year.

For example; the tax year starting on 6th April 2023 will end on 5th April 2024 and the deadline for filing online and paying any taxes due will be 31 January 2025. The deadline for filing by paper with be 31 October 2024.

Our clients get email reminders about all the deadlines relevant to them.

Required records for Self Assessment

The required records for self-assessment will depend on your individual circumstances. These may include, but are not limited to, invoices, receipts, bank statements, payroll records for employees, your P60, P45, P11D, among others.

It is important to retain these records for at least 5 years, along with the current tax year’s records. By keeping detailed records, you can make the tax filing process easier and ensure accuracy while minimising the risk of errors. Don’t forget to keep track of any eligible deductions or allowances, such as pension contributions or charitable donations, to minimise your tax liability.

Our clients get a checklist of all the various things that may need disclosing on a tax return. Even if you have been filing a tax return for years it’s always good to double check there isn’t anything new which may need reporting; like Cryptocurrencies.

Filing a tax return for the first time

Filing your tax return for the first time can be intimidating, but understanding the key steps is essential. As a UK resident, you need to disclose your worldwide income and any taxes already paid. Deductions and allowances can help reduce your tax liability. Consider using tax software or seeking professional advice if you’re unsure. Setting up a government gateway account is necessary if you’re filing through HMRC’s software.

Begin by organising your business records by income and expenses, including self-employment revenue, dividends, and foreign income. Make sure your totals go in the correct boxes on the correct pages of the tax return. Ensure you have your National Insurance number and Unique Taxpayer Reference (UTR) shown correctly on your return. Relevant documents, such as bank statements, pension scheme statements and gift aid certificates may come in handy too. Stay informed about the latest updates and deadlines to avoid costly mistakes and penalties.

We prepare and file the Self Assessment Tax Return for all our clients using third party software. We have our own filing credentials as agents so will never ask you for your government gateways login details. You should never give out your Government Gateway ID (also known as your User ID) or Password to anyone. We recommend online filing of your tax return

Paying your Self Assessment tax

When it comes to paying your Self Assessment tax, it’s natural to feel a bit overwhelmed. You will be required to pay through your self assessment tax return if you have not paid enough tax already in the year in question. If you’re unsure about any aspect of paying your Self Assessment tax by the due date, consider seeking expert advice or assistance.

How to pay

When it comes to paying your taxes, there are several options available to ensure compliance with the income tax return process. You can choose to make payment through online or telephone banking, direct debit, debit or corporate credit card (you can no longer make payment using a personal credit card), in person at your branch or by cheque in the post.

Online banking offers convenience, allowing you to transfer funds directly from your bank account. Direct debit is another option, enabling you to set up regular payments to avoid missing any deadlines. It’s important to note that timely payment is crucial, as late payments may result in penalties and interest charges. Always make sure to pay on time to avoid any unnecessary financial burden.

You will also need to know your reference number. This will be your UTR followed by a K. If you search the internet for ‘How to Pay your Self Assessment’ and go to the GOV.UK site you can make payment directly through there or find out more information on the different ways to pay.

Our clients will get a handy email from us providing them with all the details they will need to make payment to HMRC – provided we have prepared the tax return ahead of the deadline. We’ve also made a video about making payments, to watch click this link.

How to get a refund

To receive a tax refund in the UK, you must have paid more tax than you owe. This can be done by claiming deductions and allowances that you may be eligible for or because your circumstances changed during the tax year. By maintaining precise records of your income and expenses throughout the tax year, you can accurately calculate your tax liability and identify potential refunds. If you’re uncertain it’s advisable to consult an accountant or tax advisor for expert guidance.

If you do have a refund due to you, there are two things you can do. You can request for that amount to repaid to you directly into your bank account. This can be done by providing your bank details on your tax return when it is filed. Or you can leave the overpaid amount with HMRC. They will utilise this amount to pay future tax liabilities, so you don’t have to pay them again. Once the overpayment has been used up, you will need to pay HMRC any outstanding liabilities just as before.

We would never get a client’s refund paid to us, nor would we ever take our fee out of your refund.

Payments on Account

Payments on Account are a mechanism whereby HMRC get you to pay your taxes early. They may also be viewed as a convenient way to prepay your tax bill, ensuring that you’re staying on top of your tax responsibilities. The way they work is that HMRC assume that your next years lax liability will be the same as this years tax liability. They get you to pay 50% on the first payment on account and 50% on the second payment on account. Any difference is calculated as a balancing payment and will be paid on the normal deadline.

The first payment on account is due by January 31st within the tax year, while the second payment on account is due by July 31st following the end of the tax year. For example; the tax year 2021/22 started on 6th April 2021 and ended on 5th April 2022. The first payment on account was due on 31 January 2022 with the second payment on account due on 31 July 2023. Any difference will be calculated and paid on the normal deadline of 31 January following the tax year. In this example, 31 January 2023.

It’s important to note that these payments are not set in stone. I f your tax liability for the current year is lower than the previous year, you can apply to reduce your Payments on Account. However, if you do this and your payments should not have been reduced HMRC will charge interest on the late payments and may charge penalties.

We make sure all our clients understand their payments on account and email them with a convenient reminder when they are due, how much to pay and how to pay. To watch our video about Payments on Account follow this link.

Conclusion

Understanding the basics of self-assessment tax returns is crucial for a successful tax return filing. From registering with HMRC, to knowing important deadlines and required records, being informed and organised will save you time and stress. Additionally, knowing how to pay your self-assessment tax and how to claim a refund if applicable is equally important.

If you require any help or would like us to take the headache away from you – get in touch. Our telephone number is 01782 479 699. Our email is hello@premiertaxsolutions.co.uk

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Mastering the Tax Return: The Ultimate Guide to Success