Last Christmas 1,566 returns were filed on Christmas day
Bonfire night has been and gone and Christmas is fast approaching. It will very soon be 2015 and the 31 January Tax return deadline will be upon us. For most accountants this is the busiest time of the year.
If you need to submit a return and are planning to do this yourself then the following tips may be helpful.
Returns need to be filed online, so make sure you have registered to file a return. Can you remember your password from last year? It can take 10 days to register so don’t leave this until the end of January.
Set aside plenty of time to prepare the return as it can be time consuming and you may need to get more information to complete the return.
Read the HMRC notes that are relevant to your return. Income tax rules change and what might have been an allowable expense last year might not be this year. This is especially the case for self employment and rental income.
The self employed are now able to declare their self employment income on the Cash Basis – income is declared in the year received and expenses deducted when paid. In the past many people preparing their own tax returns were probably incorrectly using this method anyway and so it is a case of the tax law now making this an acceptable practice. In previous years the tax law required accounts to be prepared under the accruals basis which recognises income and expenses when earned rather than received. The new cash basis is not available to everyone and only applies to businesses below the VAT threshold of £81,000. Alongside the introduction of the cash basis there are a number of new flat rate reliefs that are available such as an allowance for working from home and finance costs. If you are self employed and preparing your own return then look carefully at the HMRC notes in their Helpsheet 222. It’s a 16 page document so probably not a light bedtime read.
Rental Income rules have changed as well and now restrict tax relief on the cost of replacing furnishings, furniture and white goods. These changes may have minimal impact on properties let fully furnished as a 10% wear and tear allownce continues to be available. But owners of unfurnished or partly furnished properties will now be denied relief on the cost of replacing such items as carpets, curtains and non integral kitchen applances. The 2013 tax return notes contained the following “you can claim the costs of replacing furniture, furnishings and machinery supplied with your property. You can also include the costs of renewing small items such as cutlery“, but the 2014 notes state “Include the costs of renewing small items such as cutlery, …….The renewals allowance for the cost of replacing furniture, furnishings or machinery is no longer available for 2013–14 and the years that follow.”
Anyone unsure about preparing their own return should seek advice. Yes, there are costs involved, but do you want to risk getting it wrong which can lead to penalties.
Remember that there are also penalties for filing a late return. A few years ago these started at £100, with a further £100 after 6 months, but importantly the penalty could never exceed the liability, so if you were due a refund then the penalty would be nil. Under the current rules, in the same period the penalty would be £1,300, even if you owed no tax.