FAQs

A tax return is the name given to the form used by an individual to record

• all the money they receive which is taxable.
• The amount of tax they have already paid.
• Any claims for tax allowances or tax reliefs.

The return forms part of HMRC’s self assessment system and will be used to calculate any tax that is owed or due to be refunded to the individual.

Well first and foremost, if HMRC has asked you to complete a tax return then you have to comply and submit your information on time.

If you haven’t been asked by HMRC but you know you’ve received some income that hasn’t had any tax deducted, then you’ll need to consider registering with HMRC to complete a tax return.

Generally speaking, if you are self-employed or are a landlord you must submit a tax return as you will be in receipt of untaxed income.

Most working people don’t have to complete a tax return because they are employees and have income tax deducted via their employer’s PAYE (Pay As You Earn) scheme. But even if you are employed, you’ll still need to consider if you have any untaxed income such as savings interest, renting property or dividends. And don’t forget to consider Child Benefit.

Initially almost 1 million employed higher rate taxpayers where required to submit a tax return following changes made regarding the taxation of child benefit. Where a parent receives Child Benefit and one or both of the parents earn in excess of £50,000 you will need to consider completing a tax return and repaying some or all of the Child Benefit received in the tax year.

If you are unsure whether or not any money you have received is subject to tax, then speak with an accountant.

Sometimes you may not have any untaxed income to declare but you may still complete a tax return where you want to claim a tax refund (for example on charitable donations, pension contributions or job related expenses) or to simply prove you are self-employed, for example to claim maternity allowance.

You will need to register online with HMRC. There are a number of options on how to register depending on the reason why you want to register and whether or not you have been previously registered.

Once registered you will receive your own 10 digit unique tax reference; often referred to as your UTR.

To ensure that you can file your tax return online you will need to set up a Government Gateway account using your UTR.

Once you have set up a Government Gateway account you will receive an activation code, through the post, to make you account activate.

The deadlines are the same every year (although that doesn’t stop most people from pushing them to the limit every year):

• 5 October is the deadline to register for a tax return for the first time (if you’ve received untaxed income in the previous tax year)
• 31 October is the deadline for submitting a paper tax return, but you’ll enjoy a far more generous deadline of 31 January if you submit online
• 31 January is also the deadline for paying any tax due for the tax year you are declaring. At this point you may also have to pay some tax on account for the following tax year too, which is called ‘payment on account’ and usually amounts to half your previous year’s tax bill.
• 31 July is the deadline for making your second payment on account (which covers the other half)
The actual online filing deadline is the later of 31st January and three months from being issued a notice to make a return by HMRC. So if you receive a notice to make an online tax return dated 30th November you have until end of February to file your return.

Put simply, you’ll pay for it. Whatever you do don’t ignore filing a tax return as your wallet will be severely lighter for not doing so.

Submit your tax return just one day late and it will cost you £100. If after 3 months your tax return is still outstanding the penalties start to add up at £10 per day up to a maximum of £900. So, after nearly six months the penalties could be as high as £1,000.

But they don’t stop there, if it’s still outstanding after a full 6 months a further penalty will be imposed based on the greater of £300 or 5% of the actual tax due. A similar penalty will apply if the return is still unfiled after 12 months. Although this could rise to 100% of the tax due depending on the behaviours behind the reason for being late.

That’s not all. The above fines are for being late in submitting your tax return. There are additional fines if you’re late paying your tax, which are 5% of the tax due after 30 days, 6 and 12 months.

Whether you are setting aside time to get this annual chore done yourself or getting your accountant to do it on your behalf you will still need to get organised and make sure you have the following information.

• Your 10 digit unique tax reference (“UTR’)
• Your National Insurance Number
• A P60 (End of Year Certificate) and if appropriate a P11d (Expenses and Benefits) supplied by your employer.
• Details of any untaxed income received, for example bank interest, dividend income from any shares held.
• Income relating to pensions and/or any state benefits.
• Amount of Child Benefit received, number of children claimed for, when any claims started or ended in the tax year.
• Income and expenses of any self employed business activity or property rental.
• Any charitable donations or pension contributions; as these may qualify for tax relief.
• Information on any student loans

After you’ve completed your tax return you’ll be informed of how much tax you’ll need to pay by the 31st January deadline. If you’re lucky enough to be due a tax refund you should get this into your bank account in a matter of days.

Through your tax code

If your tax bill is less than £3,000, you submitted your return before the 30th December and you already pay tax as an employee through the PAYE system you qualify to request that your tax code is adjusted. This means that the tax you owe is collected via your normal weekly or monthly payslips over the course of 12 months.

However, your request to pay your tax bill via your tax code can be turned down if any of the following would apply:

• You wouldn’t earn enough as an employee to pay the tax,
• You would end up paying more than 50% of your earnings as tax,
• You would be paying more than double the normal amount of tax on these earnings.

Direct Payment

To pay in full you must submit your payment to one of two HMRC bank accounts using an 11 digit reference.

The two accounts are

Sort Code 08 32 10 Account Code 12001039 HMRC Cumbernauld

Sort Code 08 32 10 Account Code 12001020 HMRC Shipley

Your bill should tell you which account to use but if in doubt use Cumbernauld.

The 11 digit reference is your 10 digit UTR number followed by the letter k.

Budget plan option

You can only use this option to make payments in advance. You can’t decide to use this option after you have submitted your tax return and received your tax bill.

Under the payment plan you can decide how much you want to pay either each week or each month. Once you have submitted your return and had your tax bill calculated any amounts still owed must be paid in full.

If you receive a nasty shock from the amount of tax you owe you must not ignore it. Not paying a tax bill will initially lead to financial penalties and interest charges; ultimately a bigger bill.

Further refusal to pay could ultimately lead to court action, bankruptcy and loss of your business.

You should get in touch, as soon as possible, with HMRC’s Business Payment Support Services on 0300 200 3825 in order to be assessed for either an extension to the payment deadline or for the opportunity to pay in instalments.

Put simply a tax refund, or tax rebate, is the money the tax man owes you when you have paid too much tax.

You will either have actually paid HMRC too much or you haven’t claimed the tax relief you are entitled too.

You may be due a refund where during the tax year you…

• stopped working in a tax year,
• left the UK during a tax year,
• have an incorrect tax code on an employment or pension,
• had CIS deductions taken off your income,
• made a mistake on your tax return
• Paid too much tax on your savings interest
• Unused married couples allowance,
• Made a business loss in a trading period,
• used your own money to pay for certain items for your job such as…
  • Food, Travel & Accommodation costs; when travelling between temporary work places
  • Laundry costs for a uniform or their repair or replacement
  • Tools or other equipment essential to do your job
  • Professional subscriptions or fees (paid to approved organisations)
  • Business Mileage, where your employer has paid you less than the approved mileage rates.
There is usually a time limit on making a claim. The length of time available will depend on what you are claiming for.

Put simply, payments on account are advance payments towards next year’s tax bill.

Where you’ve completed a tax return which results in tax being payable, HMRC assumes that a similar amount of tax will be due for the following year as well.

You are obliged to pay this similar amount in two equal instalments. The first payment deadline is 31st January with the second being six months later at 31st July.

Once the actual tax due for the following tax year has been calculated you may find that the payments on account are not enough to cover your tax bill. A further amount due, known as the balancing payment, will need to be paid.

Your ‘payments on account’ are based on your tax bill (including class 4 national insurance; if you are self employed) from your previous tax return.

If you previous tax return income payments for capital gains and/ or student loan repayments these will not be included in your payments on account calculation.

Firstly, HMRC don’t expected you to make a payment on account where:

• the tax payable on your tax return is less than £1,000 or,
• You have already paid 80% or more of the tax due on all your income, for example through your employer’s PAYE scheme.

However, if you know that due to a change in your circumstances a similar amount of tax will not be due the following year, then you can apply to HMRC to reduce the payments on account; down to zero if necessary.