Self-Assessment – important points to remember when preparing your tax return
Juan Carlos Venegas FAIA FCPA ICFS FIICFIP
Forensic Accountant, Tax Consultant (UK/Spain), Finance Trainer (English, Portuguese and Spanish)
?The tax return filing deadline is approaching, and it is important that all sources of income are included in order to pay the right amount of tax and avoid problems with HMRC.
?It is also important to maximise any losses, tax reliefs and any allowance available for the tax year.
?For that reason, you must check with your clients so that you can be certain that nothing has been left behind.
?What do you need to check?
1.?????Sources of income
?Have all sources of income be included: salaries and/or profits from self-employment of partnership, interest from savings, dividends from shares, state pension (which is not exempt from tax even if it is not taxed at source), private pensions, taxable benefits, rental income, and SEISS grants.
?2.?????Capital gains or losses
?Any gain from the disposal of assets must be reported on the capital gains supplementary pages. However, if you total gains don’t exceed the annual exemption for the tax year, and the proceeds don’t exceed four times the annual exemption, you can ignore it.
?On the other hand, if the property sold was your only or main residence, make sure that you have the occupancy history, so that the private residence relief exemption (PRR) has been applied correctly. Remember that if the property was your main residence for only part of the ownership period, the PRR might only apply to part of the gain.
?However, if you dispose of assets where a loss arose, then no tax is due. You don’t need to report them, but if you don’t, then you won’t be able to use them to reduce future gain, so always report losses.
?3.?????Pension contributions
?Pension contributions made need to be reported other than those deducted by an employer from the gross pay, in order to receive the full tax relief.
Be careful if your total contributions exceed ￡40,000 in a tax year, you might be liable to the annual allowance charge. On the other hand, if your contributions exceed ￡40,000, check your contributions for the previous three years, as you can carry any unused allowance forward.
?4.?????Charitable donations
?Donations made to registered charities attract tax relief for higher and additional rate taxpayers. That includes memberships to organisation like the National Trust or English Heritage if you’ve gift aided them, as well as one-off entry fees into various zoos, museums and exhibitions around the country.
?5.?????Marriage allowance
?This can reduce your tax bill, if you are a basic rate taxpayer, and your partner does not fully use their personal allowance. They can elect to transfer up to 10% of their allowance to you, which would reduce the tax liability by ￡250 in the tax year.
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?6.?????Coronavirus – Self-Employment Income Support Scheme (SEISS) payments
?Ensure the payments are showing in the correct box – 70.1 on the tax return. If this box is empty, or the figure doesn’t match what HMRC holds on record as being paid to you, the return will be corrected automatically.
However, if you have included the payments elsewhere, e.g. in “Other income” you could end up being taxed twice.
?Payments from the first, second and third SEISS grants (received on or before 5 April 2021) should have been included on your 2020 to 2021 return in the box for Self-Employment Income Support Scheme grants. These can be found:
?HMRC are correcting returns where SEISS grants have been reported incorrectly.
?If HMRC have corrected your return, you must check whether you used the correct boxes or not.
If you included your SEISS grants in an incorrect part of your return (such as the ‘turnover’ or ‘any other income’ boxes), you can make amendments by phoning: 0300 200 3310.
?Amendments for other reasons must still be made online or by writing to HMRC.
?7.?????High income child benefit charge
?If you (or your partner) are in receipt of child benefit and either of your income exceeds ￡50,000, you will be subject to the charge. Therefore, remember to include the relevant details.
?8.?????Coronavirus Job Retention Scheme payments
?If you have received furlough payments, ensure these are included in your “earnings” figure.
?9.?????Other tax reliefs
?If you have made investments under the EIS, VCT or SEIS then you can claim the income tax relief as long as you have been issued with the certificate saying you can do so.
?10.?Coding out
?Remember that if you want HMRC to collect your tax due via future PAYE code, you need to have your tax return filed by 30 December. However, the amount owing cannot exceed ￡3,000.