Q&A: Self-assessment tax returns
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With the annual self-assessment deadline less than a month away, if you haven't already completed your return, you need to act quickly if you are to avoid a fine
Tom Whitney asks Simon Littlejohns (SL), tax partner at accountancy firm PKF, how those affected should prepare for the 31 January personal tax self-assessment deadline.
What are my legal obligations? SL: You must complete a tax return and make a tax payment every year by 31 January if you are self-employed as a sole trader or partner, or if you are a company director. You're responsible for making your own tax and National Insurance payments. Based on your business profits, the self-assessment tax return is used to calculate how much tax you owe. It's your responsibility to declare all your income - including salary, fees, dividends and interest on savings. You must also declare taxable benefits you receive as an employee, such as a company car or any medical insurance. What if I haven't received a tax return? SL: You should have received one last year, but if you didn't it is your responsibility to ask for one if you have income or profits to declare. You can download the forms you need at the HM Revenue & Customs (HMRC) website What information will I need to complete the return? SL: Details of your taxable income for your last accounting year, which ended on 5 April 2006. If you are unsure about an answer on the tax return, give as much extra detail as possible in the 'additional information' boxes. What common mistakes should I avoid? SL: Make sure you sign the return and include all paperwork that you've been asked for. Don't forget to list all your sources of income. For example, even if you just have a small amount in a savings account, you need to include it. The key to avoiding problems is to keep detailed financial records to support the information provided in your tax return. The self-employed are required to keep records for five years after the filing date. If you fail to keep adequate records, you can be fined up to £3,000. Where should I submit the return? SL: You can complete and file your tax return online or on paper. If you file your return online, the system will immediately show you how much tax you owe or are owed. You can file return right up to midnight on 31 January. If you are relying on the post, leave plenty of time for your return to be delivered. What if I don't get my tax payment in on time? SL: Those who miss the deadline will have to pay a £100 fine. A surcharge of five per cent is applied to tax still outstanding 28 days after the deadline. A further £100 penalty is payable if the payment has not been made by 31 July. If you still fail to pay after this date, you can be fined up to £60 per day. Where can I get more help? SL: Make the most of HMRC's self-assessment helpline. Alternatively, you could pay to get an accountant to calculate your tax bill for you.
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