We’re at that time of year again where many people will have to fill out online tax returns. It’s likely you’ll be receiving a reminder in the post soon, if you haven’t already.
People who have to complete an online tax return include the self-employed, people with savings income above the allowance threshold, and people with casual freelance income.
This blog post will give you the basic knowledge you need to complete an online tax return, the deadline for which is midnight on the 31st January 2018 for the 2016/17 tax year.
What will your tax return look like?
The full tax return is eight pages long and contains space to disclose figures for income from all different sources, such as employment income, savings and capital gains.
In some cases, HMRC will issue a short tax return. Rather than the full eight pages, this form is just four pages long, making it easier to fill out correctly. You can’t choose to fill out this version of the form; HMRC has to send it to you. The short forms tend to be issued with people whose incomes are fairly straightforward, such as company directors or people with redundancy payments of over £30,000.
It’s important to note that you have to alert HMRC if you have been issued a short form and cannot fill out your details correctly. The fact that you were sent a short form is not an excuse if HMRC find that you have not disclosed all of your income.
Filling out your tax return correctly
In order to fill out your tax return correctly, you need the most up to date paperwork you have for all your different kinds of income. For example, you should refer to a P60 for information on income from employment, or contracts showing evidence of capital gains, such as the sale of your company shares.
As you fill out the pages of the tax return, you need to make sure that you are giving the figures for the most recent financial year and that the details are going in the right place. It sounds easy, but a common cause of errors on tax returns is figures being put in the wrong box, which can ultimately lead to the wrong amount of tax being paid.
Catching mistakes before they cause problems
When completing an online tax return, the amount of tax that needs to be paid based on the information you have inputted will be shown before you file the report. It is important to check the number that the software returns to see if it’s what you expected. If the calculation suggests that you owe extra tax or you need a tax refund that you weren’t expecting, you should go back and check all the information that you have entered before proceeding to file the report.
Occasionally, people notice mistakes after the report has been filed and payment has been made. This is unfortunate, but happens every now and then. Any mistakes that you notice can be amended without too much trouble within 12 months of the date the tax return was filed. If you have overpaid tax as a result of the mistake, you can make an overpayment relief claim to try and get it back, but you should seek professional advice if you go down this route.
If you think there has been a mistake in HMRC’s calculation of the tax you owe rather than in the information you entered, you should speak to HMRC as soon as possible and ask for clarification of how they arrived at their figure. If there has been a genuine error, you will be able to get it corrected.
Paying your tax
The deadline for tax payment is the same as the deadline for the filing of your online tax return. After January 31st, HMRC will start charging interest on any tax that you owe, and after 30 days, you will start accumulating late payment charges.
Bear in mind that you won’t pay all your tax for the previous financial year when you file your tax return. Most tax will have already been paid during the financial year. HMRC charges tax from people under self assessment in two instalments, each one worth half of the total tax that was paid the year before. The only tax you pay with the tax return is any extra that you owe on top of that, and in some cases you may receive a refund if your tax from the previous year was higher than the current period.