There's only a matter of weeks left until the 31 January deadline for filing self-assessment tax returns for the 2015/2016 tax year. If you need to file a return and have yet to do so, you've already missed the deadline for filing a paper tax return which was 31 October 2016 so you will need to file an online return.
You may have set yourself up for online filing when you first registered for self-assessment. If you didn't, go to Online.HMRC.gov.uk/registration, select "individual" and "self-assessment" and fill in the details requested. Make sure you keep a note of the User ID you are assigned and the password you create. You'll then be sent an activation code, which can take up to seven working days to arrive in the post, so it's important to do this now, not on 31 January.
Once you are registered, gather all your paperwork together before you start filling in the return. You'll need a P60 form from your employer showing your income and the tax you've already paid, a P45 if you left a job within the 2015/2016 tax year, a P11D or P9D showing your benefits and expenses, and details of any interest from bank accounts, dividends and any other income you receive.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Next, consider your expenses. There are a number of legitimate costs you can claim that will reduce your tax bill. If you work from home you can claim for part of the costs of running your home as a business expense. Check HMRC's website or call its helpline for advice if you're unsure about anything.
If you find the process complicated and are worried you are going to make a mistake or end up paying far more tax than you should, consider using an accountant. They will charge you upwards of £150, but could save you more in tax, as well as giving peace of mind that the taxman isn't going to hunt you down due to a mistake. Once you've filed your return, don't forget to pay your bill. Anything owed for the 2015/2016 tax year must be paid by 31 January 2017 otherwise you'll start to incur fines for late payment.
Deadlines and penalties
All self-assessment tax returns must be filed by midnight on 31 January 2017. There are financial penalties for later filing that can mount up quickly, so it's important to meet this deadline.
If you don't file by 31 January, you will be fined £100. If you are more than three months late you will be fined £10 a day, up to a maximum of 90 days. Once you are more than six months late, you'll be fined another £300 or 5% of the tax due, whichever is higher, on top of the £1,000 you've already been charged. If your return is more than 12 months late, you'll be charged all of the penalties already listed, plus another £300 or 5% of the tax due. Finally, if HMRC thinks you are deliberately withholding or concealing information, you can be fined up to 100% of the tax due on top of the original bill.
In addition to fines for late filing, HMRC will also levy fines for late payment. All tax due under self-assessment for the tax year 2015/2016 must reach HMRC by midnight on 31 January 2017 (so if you are late filing and you owe tax, you will usually incur payment penalties as well). If you are a month late in paying, you'll be fined 5% of your tax bill, followed by another 5% after six months and a further 5% after 12 months.
If your self-assessment bill is more than £1,000, you will have to make payments on account towards your next tax bill. The first of these is due on 31 January 2017 along with your tax for the 2015/2016 tax year and amounts to half your tax bill for 2015/2016. The second payment is due by 31 July 2017. However, if you know that your tax bill for this year will be lower than last year, you can ask HMRC to reduce your payments on account.
In the news this week...
If you were given a gift voucher this Christmas, you should use it promptly, says Toby Walne in The Mail on Sunday. About £300m in gift cards remains unspent each year, usually because the cards expire, are forgotten about, or lost. The length of time you have in which to use them varies hugely, so check the small print on the back. The most common expiry period is 24 months, although any purchases during this time often "resets the clock" and extends the expiry date. Amazon gift cards last for ten years, but Buyagift gives you just ten months. Overall, it's another good reason to stick to giving hard cash.
Tax dodgers beware, says Laura Suter in The Daily Telegraph. HM Revenue & Customs has "spent years" and more than £100m on a "super-computer designed to identify those who may have paid too little tax" and it is being "fully deployed" right now, just days away from the deadline for filing tax returns. Each one of us now leaves a huge "electronic footprint" and HMRC's powerful "Connect" system draws on data from "myriad sources" from the Land Registry to the Driver and Vehicle Licensing Agency to eBay to create a profile of each taxpayer's income.
Where there are discrepancies with information provided by the taxpayer, "the account is flagged and could be subject to further investigation". "This is the tipping of the scales," says Richard Morley of accountant BDO. Those "making minor tax errors" can no longer feel safe.
There is a glaring omission on the Treasury's new leaflet "Ways to Save in 2017", says Josephine Cumbo in the Financial Times: pensions. It mentions the Junior Isa, Help to Buy Isa, Premium Bonds, cash and stocks and shares Isas and the new Lifetime Isa, but not pensions. The pensions industry has reacted "strongly" and the Confederation of British Industry also voiced its concern that it ignores "the single best, and most rewarding, way to save tax efficiently for retirement".
There is growing anxiety that the government is "still planning to push through radical tax changes, which would effectively see pensions taxed like Isas, where tax relief is not given up front". Ros Altmann, a former pensions minister, said she was "horrified" by the leaflet, saying it suggests that "our private pension system is under existential threat".
-
Most expensive street in Britain to buy on has houses with '£10m average asking price', Rightmove findsNews Rightmove found Buckingham Gate, close to Buckingham Palace, was the most expensive street in the country. Do you live near one that's been included on the list?
-
Smaller companies: starting to turn?The long-awaited turnaround in smaller companies is unlikely to happen just because shares are lowly-valued. However, an improving economic and interest rate backdrop could spark renewed interest in the sector. M&A activity is also providing support for the smaller companies sector
