With festive activities finally drawing to a close, many of you may be turning your thoughts into submitting your self-assessment ahead of the 31st January deadline. However, with the deadline being less than a month away, leaving your self-assessment to the final minutes could be a rather expensive mistake to make. So, we’ve collated the top 4 areas that most forget, saving you the hassle of those costly, yet avoidable fines.
What is a Self-assessment?
Let’s go back to basics. What is a Self-Assessment? Well, essentially this is a system curated by HM Revenue & Customs to collect income taxes. Salaries, pensions, and savings all incur tax deductions. However, people and businesses with additional incomes must report all other data in their tax return. If you do need to fill out a self-assessment form then you can do so by completing one on the HMRC website.
While HM Revenue & Customs reports that 52% of current taxpayers have already filed their returns, it estimated that around 5.5m people are still yet to submit their assessments. If you are one of the 5.5m still outstanding, then it’s probably best to get the ball rolling as soon as possible.
1.0. Inaccurate Data
Amidst all of the festive celebrations, it is highly likely that self-assessments have been slightly overlooked and put on the back burner. With less than a month until the deadline, it’s imperative that you have all accurate data at your own disposal. Queue panic mode… As a result, inaccurate data can often crop up, surfacing errors and ultimately a costly fine if your data is not submitted accurately, and ahead of the deadline. If you are submitting your tax return, you should aim to double check all data typically salaries, dividends, and other income data before final sign off. Drawings, use of home office, and mileage should also be accounted for if you are acting as a sole trader.
2.0. Payments on Account
For those who pay most of their tax through Self-Assessment, HMRC runs a system called ‘Payment on Account’. If your return totals more than £1,000, then you’ll need to set up a payment on account. Good news? If more than 80% of your income is taxed through PAYE, then this is not applicable to you! However, with the good comes the bad. This does mean that in addition to your current 2017/18 tax bill you also need to pay 50% of your total expected 2018/19 tax too. The remaining amount needs to be paid off by 31st July 2019.
3.0. Interest From Personal Bank Accounts
A personal savings allowance should be visible on any self-assessment, indicating your full income and earnings. If you are a lower threshold taxpayer then you will be able to earn up to £1000 in savings income tax-free. But, higher bracket taxpayers will be able to earn up to £500. Savings income includes account interest from:
- Bank and building societies
- Provider accounts (Credit unions or National Savings Investments NS&I for lower bracket thresholds)
- Interest distributions from investment trusts, open-ended investment companies, and authorised unit trusts.
- Government income or company bonds
- Purchased life annuity payments.
Although the following do not count towards your Personal Savings Allowance, they should still be documented in your self-assessment:
- Fixed Interest Savings Certificates
- Index-linked Savings Certificates
- Premium bonds
- Individual savings accounts (ISA)
4.0. Gift Aid
If you have made a charitable donation under the Gift Aid scheme, then this can sometimes reduce your total self-assessment bill. Indicating Gift Aid declarations within your self-assessment is a must, as all donations qualify as long as they are no more than 4x the total amount paid in tax that year. If you aren’t a taxpayer then, unfortunately, gift aid donations can’t be claimed.
With the countdown firmly ticking down until deadline day, make sure you set aside some time, sooner rather than later, to fully submit your self-assessment to save you the stress and expense of a late submission.