Self Assessment Tax Returns – FAQ’s

The 2020 year is been difficult for many of us and with so much to think about we forget about routine things. Forgetting about your tax return could cause unnecessary stress and worry at the time we don’t need more of it.

Given the situation we all found ourselves in, you might find that there are new challenges to overcome as you gather everything you need to complete your Self Assessment. You may have been working from different locations to adhere to the social distancing guidelines. Give yourself all the time you need to collect together and check the documents. The tax return isn’t just about telling HMRC your income and what you owe in tax; it is also your opportunity to take stock of business-related expenses and document any tax exemptions.

 I am not sure if I need to complete a Tax Return. How will I know if I do?

This depends on your circumstances. You must complete Self Assessment if you fit into any of the following categories:

• You have earned more than £2,500 from renting out a property
• You have received, or your partner has received, child benefit and either of you had an annual income of more than £50,000
• You’ve received more than £2,500 in other untaxed income; for example from tips and commission
• You are a self-employed sole trader with an annual turnover of over £1,000
• You are an employee claiming expenses in excess of £2,500
• You have an annual income of over £100,000
• You have income from abroad that you need to pay tax on

 I need to complete a return. What do I do now?

If this Is your first tax return, you will need to register at GOV.UK. It is a straightforward process, but if this is your first time, it is very important to register sooner rather than later, as it can take up to 10 working days for the registration to arrive in the post.

Visit the website:www.gov.uk/log-in-file-self-assesment-tax-return. Have some identification and key information to hand, such as your passport, National Insurance number, and bank details. Once you registered, you will be given your Unique Taxpayer Reference (UTR) which will make any future tax returns far easier. Anyone who registered before already has their UTR and they use this for all their subsequent declarations.

 When do I need to submit my Tax Return?

The final deadline for the 2019-2020 tax return is 31 January 2021 for returns submitted online but we urge people not to put it off and to submit it as soon as possible. You can complete Self Assessment as soon as you have all the information you need.

 What does HMRC need to know?

HMRC needs to know what your total income was and about any employment benefits you received in the relevant tax year. If you receive an income as an employee in addition to being self-employed HMRC needs to know about this, as well as any foreign income and pension income you might receive. Employment benefits may be from your employer or your own business and could be a company car, interest-free loan, and/or health insurance, to give a few examples. These will be declared in form P11D.

You need to declare any earnings from the property if you are a buy to let investor, but don’t forget that certain expenses and allowances can be applied to that income to reduce your tax bill; for example, buildings and contents insurance. Any significant gains from the sale of stocks, shares, property, or any part of your business need to be declared on your Self Assessment Return.

Be aware that the process for capital gains tax on UK residential property sold since 6 April 2020 has changed. It must be now declared and paid within 30 days of completion. This only applies where the property in question is not exempt from tax, typically as the seller’s main home.

 What about allowances and expenses for tax relief?

HMRC needs to know about your work expenses. These are defined as either ‘travelling to your job’ or ‘other expenses you had to pay in doing your job-and only whilst doing your job’. Examples may include car mileage and the cost of hotel rooms for business trips. You can also count business expenses, such as the cost of printer ink and business stationery.  The recent addition to this list is working from home expenses unless paid by your employer.

If you are self-employed and have bought work equipment such as a computer, printer, phone, you can’t necessarily claim these as expenses. But you can claim tax relief on them through the annual investment allowance (AIA) as part of your tax return.  The AIA amount has temporarily increased to £1million between 1 January 2019 and 31 December 2020. For the most part, AIA covers the cost of purchases you need to carry out your business.

Charitable donations are taken into account and deducted from your tax liability. It is possible to make a donation now and carry it back into the previous year, provided you donate before filing your return. Gift Aid donations give you as much as 60% tax relief (20% of which goes directly to charity). You must provide details of student loan repayments in the relevant section of your return. You must declare it, but there is no tax relief on loan payments.

 I am concerned about my tax bill- is there anything I can do?

Some people who find themselves in the position of worrying about paying their tax bill may, unfortunately, be reluctant to call HMRC to deal with this. This is why they have made it easier for customers to make their arrangements for managing how they pay their taxes. Self-serve time to pay is our online payment plan service. Self-assessment customers can apply online for additional support allowing them to spread the cost of their tax bill into monthly payments. Self-serve time to pay could always be used for tax liabilities up to £10,000 but as of the beginning of October 2020, the maximum amount has been increased to £30,000. The aim is to support self-assessment customers who may be experiencing financial issues due to the pandemic.

When you complete your tax return for the 2019-2020 tax year, you may have the option of using the online Self Serve Time To Pay facility through GOV.The UK to set up a direct debit and pay any tax that is owed in monthly instalments. If you wish to set up your own monthly payment plan, you must meet the following requirements:

• No outstanding tax return;
• No other tax debts
• No other HMRC payment plans set up

 Any additional advice?

Give yourself plenty of time- do not put it off to the last minute. Rushing to get your information to the HMRC as the clock is ticking makes it more likely that you will make a mistake or forget to include some of your allowances. Plan when you will complete the return well in advance. Get you all your documents together, check them first for the accuracy or missing information, and set aside time to enter the details online. The system will calculate your tax automatically as you fill in the sections, but do not worry if you have a lot of information to go through- you can save your progress and come back to it later. You don’t need to complete everything in one sitting.