5 top tips for your tax return

It’s that time of year when, if you haven’t already completed your self-assessment tax return for 2012-13, you need to get your skates on to avoid a fine. In fact, the deadline is Friday this week!

Not everyone needs to complete a return, of course. But if you’re self-employed, have made capital gains or remain in receipt of child benefit but earn over £50,000 a year (or are in a couple and your partner does), you are in the self-assessment system – and must therefore file a return.

This is the case even if you do not owe any tax for the 2012-13 tax year (which ran to April 5, 2013).

Whatever the reason you have to fill in a return, you are already too late to do it by post. The deadline for that passed back in September. The (free) online service is available for last-minute returns, which can be filed until midnight on January 31 – this coming Friday.

Steep penalties

But beware: miss that final deadline and you will face an immediate fine of £100 - plus further charges the longer you delay. Anyone who is late by six months, for example, could end up paying more than £1,300.

The tips below will help you get to grips with your return so you don’t fall foul of the rules.

1 Use the online system

Even if you only stand to pay a small amount, you can no longer ask HMRC to work it out through your tax code as the deadline for filing returns of this kind passed on December 31, 2013.

The good news is that online returns, now used by the majority of the self-assessment system taxpayers, calculate your tax automatically as you work your way through the document, making the process a lot simpler.

If this is your first online tax return, you will need to sign up for HMRC Online Services before you can get started, though.

2 Don’t miss the deadline

All online tax returns must reach HMRC by midnight on January 31. Fail to file your return by this deadline, and you will incur an immediate penalty of £100 – even if you have already paid what you owe, or owe nothing at all.

Other penalties to be aware of include a £10-a-day charge for anyone whose return is more than three months late, and a further £300 or 5% of the tax you owe, whichever is higher, if you miss the January 31 deadline by six months.

There are also fines for late payment of tax, so it is vital to ensure that you also meet the January 31 deadline. It makes sense to send the money by internet transfer in advance to be safe – give yourself a minimum of 24 hours.

3. Collect all the necessary information beforehand

To complete your tax return online, you will need your Unique Taxpayer Reference number, which you should find on any letters you have received from HMRC, plus either your postcode or National Insurance number (unless you live abroad).

You will also need your income, both from employment and from investments such as shares, and the amounts spent on deductible expenses such as work travel, gift aid contributions and stationery, for example.

Useful documents to have to hand include your P60 (which shows how much tax you’ve paid on your salary) and P11D (which shows how much you get in ‘benefits in kind’ such as a company car). You can get these from your employer – many firms send them automatically.

Also round up your interest statements from banks and building societies and information on dividends from shares. Dividends and interest are paid net of tax, but higher rate taxpayers (in the 40% and 45% bands) must pay additional tax through the self-assessment process.

4. Get it right and avoid an investigation

It is worth taking the time to get the details on your tax return right as mistakes could lead to your affairs being investigated by HMRC – and that could lead to a lot of stress, not to mention a fine of up to £3,000.

If, for example, you are one of the up to 500,000 taxpayers affected by the child benefit changes introduced last year, it is crucial to remember to include any money you owe the government due to the system becoming means-tested.

This will be equivalent to the amount received if you or your partner earns more than £60,000, and a percentage of that amount if your income is between £50,000 and £60,000. For 2012-13 tax returns, the tax man is interested in Child Benefit received in January, February and March 2013.

This time next year, Child Benefit paid throughout the 2013-14 tax year will be under scrutiny. You can elect to stop receiving Child Benefit if you prefer not to account for the associated tax on your return – but that will not avoid any liability you have incurred already.

Once you have finished your return it is vital to save a copy, just in case there are any problems. This will also be a great help when you come to fill in your tax return again next year.

5. Ask for help if you need it

If you are unsure about any aspect of completing your tax return online, the best way to avoid getting it wrong is to contact HMRC's Self Assessment Helpline. It is open Monday to Friday from 8am to 8pm and from 8am to 4pm on Saturdays.

The number to call is 0300 200 3310 and you will need your Unique Taxpayer Reference number at the ready.

The HMRC website also has a numbers of useful tools. For those affected by the child benefit changes, for example, there is an online calculator to help you work out how much you owe.

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