1. Registering with HMRC
2. Tax return basics
4. Claiming business expenditure
The basics of the tax return
A tax return should disclose your taxable income and gains for the relevant tax year. A tax year starts on 6 April and ends on the following 5 April. Also note that all of your taxable income and gains must be declared on a tax return – even if they have been taxed before you received them ( or ‘taxed at source’), such as employment income or bank interest.
If you are self-employed, or a partner in a partnership, and the year end of your business is not the same as the tax year, such as 31 December, there are specific rules about which accounting period for your business goes on which tax return.
HMRC will normally send you your tax return soon after the tax year has started. It is a six-page document and its proper form reference is ‘SA100 – which you will see in the bottom left corner of page one.
Submitting the tax return
Following the end of the tax year, tax returns must be submitted to HMRC. You can submit your return on paper; this must be done by 31 October following the end of the tax year. Alternatively, you may chose to file your return online, in which case the deadline is extended to the 31 January, following the end of the tax year.
Failing to file your return on time will result in an automatic £100 fine, with further penalties depending on the length of delay. This year, the penalty rules have changed. Previously, if the tax you had to pay on 31 January was less than £100, then your penalty would be reduced to whatever was owed. But this has been scrapped and the £100 penalty is now fixed and automatic.
Paying any tax due
Any tax you owe must be paid by or on the 31 January following the end of the tax year. There are a number of ways you can pay HMRC, such as Direct Debit, Bank Giro, online banking etc.
As mentioned above, income that has already been taxed must still be declared on your tax return. However, the tax already paid at source will be deducted before arriving at the final tax bill.
Be aware that if your tax liability is over £1,000 or not much of your tax is collected at source, you may be required to make an instalment for next year’s tax as well on 31 January. Again, delaying paying HMRC could cost you interest and late payment penalties.
Completing a tax return
The seven golden rules to completing a tax return:
If filing a paper return:
1. Only use black ink
2. Only write in capital letters
3. If you make a mistake, put one line through the error and write the correct information just below the relevant box. You do not need to use correction fluid
For paper or online returns:
4. Always round income down to the nearest pound
5. Always round expenses up to the nearest pound
6. Always round tax paid to the nearest pound
7. If a box does not apply to you, leave it empty. You do not need to strike it through.