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One trend that will always remain… Your January Tax Return

January Tax Return

The Christmas celebrations may seem like a distant memory, you have successfully managed the first couple days back at work, and now it is time to think about your self assessment.

If you are not aware, the deadline for filing your tax return is 31st January. If you haven’t started thinking about it, you better get a move on. There is an automatic £100 penalty charge if it’s late!

If you are new to contracting, understanding what needs submitting and by when can be a little confusing. This breakdown provided by Cogent Accountants explains all, in simple detail:

Why you need to submit a tax return

If you are self employed or are a limited company director you are responsible for ensuring that your tax liability is correctly calculated and that any tax owed is paid on time.

The tax return is issued shortly after the end of the tax year (the fiscal year runs from 6th April – 5th April the following year). You are then required to file your tax return by 31st January.

Completing the form

It is important to remember to include all sources of income on the form, for example:

  • Income from your main employment (typically from your own limited company)
  • Dividend income ( from your own limited company and any others)
  • Income from property (if you are a landlord)
  • Income from investments
  • Income from benefits

Most contractors prefer to use the services of a specialist contractor accountant, who will provide you with a tax calculation and submit the tax return on your behalf.

Settling the account

If you have not paid enough tax for the year, you will have to settle the balance. This payment is called ‘Balancing Payment’. If you are required to make a payment, cleared funds must be with HMRC by 31st January.

Preparing for the future

As well as making the ‘Balancing Payment’, you may also be required to make two payments towards the estimated cost of your bill for the next tax year. This is known as ‘Payments on Account’.

Payments on Account are split into 2 payments: the first one is due by 31st January and the second is due by 31st July.

If you are a first time contractor, it can come as a shock having to pay tax in advance as well as paying tax on income you’ve already earned. However, once you get into the flow of the tax cycle it becomes easier to understand. And, your accountant will keep you up notified of what needs paying and when.

Be on top of it

Our advice is not to leave sorting out your self assessment to the last minute. If you are late in submitting the form you will be issued with a £100 penalty charge. Additionally, if you do not settle the balance on taxes due, will be charged interest until it is settled.

Details of charges and penalties can be found on the .Gov website.

HMRC may come knocking

HMRC may decide to conduct an enquiry into your tax return. If they do, they will provide you with written notice within 12 months of when the form was filled.

It should be emphasised that HMRC cannot query any entry on a tax return without starting an enquiry. The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.

Records you need to keep

Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.

Here is a checklist of what may be needed for an HMRC enquiry:

Employees and Directors

  • Details of payments made for business expenses (eg receipts, credit card statements)
  • Share options awarded or exercised
  • Deductions and reliefs

Documents you have signed or which have been provided to you by someone else:

  • Interest and dividends
  • Tax deduction certificates
  • Dividend vouchers
  • Gift aid payments
  • Personal pension plan certificates.
  • Personal financial records which support any claims based on amounts paid eg certificates of interest paid.

Business

  • Invoices, bank statements and paying-in slips
  • Invoices for purchases and other expenses
  • Details of personal drawings from cash and bank receipts

 

We hope this guide answers any questions you may have regarding the self assessment and if you wish to discuss anything further please contact our team at Cogent Accountants on 020 8952 2234 or visit our website www.cogentaccountants.co.uk

 


Disclaimer:

The information in this article has not been written by Caunce O’Hara Insurance Brokers Ltd or any of Caunce O’Hara’s employees. None of the opinions or views contained within this article are Caunce O’Hara’s nor do we accept responsibility for any financial advice given within the article.

Caunce O’Hara Insurance Brokers Ltd do not provide Life Insurance policies nor advice regarding Life Insurance or accounting and bookkeeping.

Caunce O’Hara Insurance Brokers Ltd do not provide marketing services and do not accept responsibility for any advice given in articles by guest writers, nor do we accept responsibility for any marketing results, positive or otherwise, from any marketing related articles hosted on this blog.

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