Reducing Tax Payments
As a Private Wealth Group partner at one of the UK’s most prestigious and well-respected accountancy firms, Tim Gregory has recently pointed out that there are many things a new self-employment tax filer must be aware of. The ability to offset taxes due on other income can be offset by business losses. You may be able to retrieve some portion of taxes paid in for 2011 by offsetting them against business loses that occurred in 2012.
Gregory has also pointed out that there may still be time to reduce payments to HM Revenue and Customs (HMRC) if you experienced a reduction in profits last year. Reaping the full benefit of the self-employment tax code requires knowledge of the code and accurate record keeping. Understanding how payments on account work can be tricky business for the uninitiated. Payments on account are typically based on the income of the previous year and if you have experienced loss of income in the past year the payments on account amount may be incorrect. With a little bit of code savvy, you might be able to reduce the amount due. This could result in a needed boost in cash flow for those feeling the pinch of the sluggish economy.
Avoiding HMRC Fines and Penalties
Of course, there are deadlines that must be met when filing any kind of tax return in order to avoid the HMRC’s fines and penalties. While the HMRC enjoyed a record number of on time filers last year, over one million citizens felt the sting of the HMRC’s punishing fines for filing late.
Forms that are needed to reduce payments on account may be retrieved from the HMRC website or you may pick them up from the local tax office. If you didn’t file by the January 31st deadline, you may still apply when you do submit your tax return. Accuracy is important. If you are in error, then you will be charged the final liability interest. The best way to ensure against such embarrassing and costly errors is to contact a competent company such as Saffery Champness. Their expertise in these matters has helped taxpayers win the tax battle for over 150 years.
When filing online for the very first time you will need to request your personal online Activation Code. Again, as Gregory reminds us, time is of the essence in this matter. Be sure and leave yourself enough time to complete the tax return process. Keep in mind that late filing automatically results in a £100 fine which is then followed by additional £10 penalties that accrue daily, even if the fine exceeds the amount of tax due you must pay. The system of fines and penalties has become quite harsh as of late. Making errors in your filing and filing late can erase any return you might have been expecting and could cost you even more money.
Getting the Tax Reliefs You Deserve
There are numerous tax reliefs still available, but the savvy self-employment filer will need to be aware of these in order to benefit. The HMRC will not correct any error not give you the benefit of a relief that you overlooked. Working from home entitles you to certain tax reliefs such as the cost of utilities that heat, cool, and light your home office area. As with any tax relief item, proper documentation is a requirement.
Gift Aid and charity donations may also reduce your 2012 tax burden. Depending on your tax rate, you can reclaim a portion of money you donated to charity last year or that you donated as a Gift Aid. Giving must be to a registered charity. Keep in mind that the purchase of tickets or other products in connection with said registered charity may be considered a donation. The rules are intricate and you may leave money on the table if you are not fully competent in the tax rules.
Bundle up your documentation and set an appointment with Saffery Champness, the accountancy experts, to ensure that you derive all possible tax relief that is due you as a self-employed tax filer.
The article was written by Alisha Webb. Alisha writes for Saffrey Champness. She has an MA in Creative Writing and she works as a financial adviser when not blogging.
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- HMRC Self Assessment – http://www.hmrc.gov.uk/sa/
- HMRC Self Assessment Helplines – http://www.hmrc.gov.uk/agents/contacting-effective.htm
Category: Money Basics