With the self-assessment deadline looming once again, a leading accountant has provided his top ten tips to help contractors complete their tax returns correctly.
Richard Mannion, national tax director at accountancy firm, Smith & Williamson, says that HMRC has far more access to taxpayer’s information than it did a few years ago, and is better equipped to pinpoint people who may attempt to under-declare their tax liabilities.
With this in mind, we have prepared some tips to help contractors and other business owners keep on the right side of HMRC, based on advice provided by the accountancy firm.
Register for Self Assessment
Have you actually registered for self-assessment? If you are a company director, you must do so, and if you have additional income which has not been taxed at source, you are likely to have to register for self assessment. It can take over a week to receive the activation code needed to access HMRC Online Services, so don’t delay.
If your contractor accountant prepares your tax return on your behalf, make sure they don’t delay, as many of them are very busy during January.
Collect all your paperwork for the previous tax year, including details of any payments in kind, your salary and dividends, and any income from sources such as property investing or asset disposals.
If you are unable to provide precise information, you can provide estimates as long as you back up any numbers with detailed workings.
If you have received any other employment income, in addition to your main contract assignments or company income (e.g. taking on extra web design work at the weekends), you should have the relevant income details to hand.
Tax Relief on Pensions
The accountancy firm says that many people frequently lose out when trying to claim tax relief on pension contributions (as higher rate taxpayers). Make sure you provide the correct gross or net pension contribution figures when prompted.
If you get stuck (presuming you are completing the self assessment form yourself), contact your accountant for help, or call the HMRC helpline on 0845 60 55 999.
Pay Your Tax On Time
You must pay your tax liability for the previous tax year by 31st January, as well as submit your tax return. If you have tax to pay, you will also have to pay your first ‘payment on account’ for the current tax year – in advance. The penalties for late payment start at £100, but can be substantial if you delay further.
Payments on Account
You can claim for a reduction for these payments on account if you are certain that your income for the current tax year is likely to be lower than during the previous one.
Keep Accurate Records
You must keep accurate records in case they are needed in the event of an enquiry. You should keep your records for 22 months from the end of the tax year in question if you are not running a business. However, if you do run a business, you should keep your records for five years.
Don’t Delay – why put off the inevitable until 30th January? You should allow yourself extra time in case you are missing important pieces of information, or suffer any manner of glitches at the last minute.