Every year, when tax return season approaches I send out a standard tax return reminder email along with a standard tax return checklist. This is a habit I picked up from working in practice for over 10 years. I very much doubt it ever gets read based on the emails and phone calls I get about tax returns. Its not very fancy which could be its downfall but in my mind, I’ve covered everything.
Even though I don’t ever receive any of them back, I hope that it might act a reminder for something that you may have forgotten. They are not trick questions and I’m not here to try and catch you out. My aim is to help you fill your tax return, firstly as accurately as I can and secondly help you save tax in case there are things that you have forgotten to declare and in which you may have paid too much tax.
The tax return checklist for this year is attached below and I’m going to go through the questions and attempt to explain why it is asked. When you start filling out a tax return, you must declare all your income whether you are employed and do some part time self-employed work, whether you have a limited company, have lots of dividends, have properties that you rent out or are a higher rate tax payer.
1. Employed income
The first question asks for your P60 (orP45) and P11d. This is all your employed income. As an employee you will have paid all your taxes and this will be reflected on your tax return. You will not be taxed on employed income again.
2. Self-employed income
If you’re self-employed then you need to send in details of all your sales and your business expenditure. For any expenses you’re not sure if it is allowed or not, send it in and I can check for you. Even if you have more than one stream of income, send everything in. You never know, if you have more expenses than income and end up with a loss, you won’t have any tax to pay. Plus, the loss can be carried forward (or back) to reduce the amount of tax you have to pay later on. More can be found here on calculating your profit.
3. Pension income
Depending on the type of the pension scheme you have, you may have tax to pay. Tax has to be paid for state pension income. For personal pension scheme, it depends on the type of scheme you have. Send in all the information you have regarding your pensions including the P60 where applicable and I can check for you.
If you receive social security and child benefits you might have some relief or you may have to repay your child benefit back depending on how much income you or your partner gets.
5. Dividends and interests
Up to a certain limit, dividends and interests are tax free. £1000 for interest and £5000 for dividends. After this you will have to pay tax on interest and dividends. Giving me this information will help us determine what you have received and what needs to be paid.
6. Capital Gains
If you sell an asset, such as a second home, this will need to be taxed separately and all information on this will be required to declare to HMRC.
7. Overseas income
Overseas income are taxable if you live in the UK or are ordinarily a resident of the UK and have domiciled status in the UK. Whether you bring it into the UK or not, if certain conditions are met, you will need to declare this on your tax return. If this is the case, the questionnaire would prompt us to call you back to confirm more details to ensure we record everything correctly. You can find more here on the HMRC website: https://www.gov.uk/tax-foreign-income
8. Mortgage interest
This is slowly being phased out but as it stands at the moment, mortgage interest on rental properties can be claimed against your rent which will reduce your profit and therefore tax due.
9. Pension contribution and Gift Aid
Pension contribution and gift aid donations has the effect of extending your basic rate allowance and therefore more of your income gets taxed at 20% and less at the higher rate of 40%. This information is beneficial for higher rate tax payers. My post on pension contributions can be found here.
10. EIS Scheme
If you invest money into things like EIS scheme where you are potentially helping a start-up, you can receive tax relief on this.
11. Student loan
If you have a student loan and are self-employed, you will need to inform HMRC who will then calculate the amount due to the student loan company.
12. Marriage transfer allowance
If you or your spouse do not use all your personal allowance, is you earn less than the personal allowance you can then elect to transfer it to the other spouse if they earn more than the PA. This will reduce the amount of tax they pay. You can read more about my post on marriage transfer allowance here.
13. Class 2 NI
There are changes happening to the national insurance but as it stands at the moment if your income is below the NI threshold, you don’t need to pay Class2 NI but you may choose to pay it voluntarily so that you get pension or other benefits and it is cheaper than paying Class 3 later on. You can read more of my posts about the different national insurances here:
This is a very brief summary of the questions on my tax return checklist. Its not an exhaustive list and there can be things on your tax return that I’ve not covered but these are some of the questions and some of the reasons why they get asked.
Feel free to get in touch if you have any queries.
As usual, if you would like any further details on this or any other accountancy matters, please follow this link: