It may be hard to believe, but paying more tax than you actually need to is a worryingly frequent occurrence. As the 31st January self assessment deadline approaches, it is important to ensure that individuals don’t pay more tax than is absolutely due and necessary.
Experience, however, does show that there are number of common pitfalls whereby people find they have paid either the wrong amount or worse, too much!
Another growing concern is the financial penalties being levied for late filing and errors made on returns. Not only are HMRC more draconian in the penalties and fines it levies, but equally they are increasingly rigorous in imposing penalties and investigating into returns.
It is possible, with the help of the support and advice of your taxation adviser and accountant, to ensure you avoid being caught by the taxman.
The following are some simple steps to adopt:
- Always consult with your advisers as soon as you receive any forms or paperwork from HMRC however innocuous they may seem, especially if the nature of that paperwork looks like some form of enquiry.
- Be timely with your affairs. Leaving the filing of your returns to the last minute inherently runs the risk of inaccuracies; for example, pressure to make the submission without reference to sometimes vital information.
- Ensuring you or your advisor appreciates the current tax regime, knowing which expenses are allowable or disallowable. For example, the full amount of mortgage payments on a buy to let repayment mortgage are sometimes claimed whereas only the interest element is allowable.
- Ensure you keep all the appropriate paperwork. Otherwise an allowable expense can become one that you are not able to substantiate and therefore claim.
- For those people who do not prepare tax returns particular care is required in checking that their PAYE coding notices are correct. For example, the coding may include benefits which have lapsed.
- Don’t rely on HMRC’s calculation even if this shows a repayment due to you. It is more common than you might think for the Revenue’s assessments and coding notices to be inaccurate, especially for those in receipt of multiple sources of income, such as pensions and for those whose circumstance may have changed. Don’t assume that HMRC would for example, link you as having two separate jobs or types of earned income.
- Advise your accountant/tax advisor in advance of any purchases or changes you are planning so your tax affairs can be arranged in advance of changes.
Based on experience, through effective management and appropriate advice, it is possible to only pay what you really need to pay. Certainly having a professional and diligent approach to your tax affairs can ensure your house is in order and that should you be subject to an enquiry or investigation you have all your ducks in a row, to be able to deal with it.
Whilst in the good times you may have felt more benevolent or paid less attention to how much tax you part with – though it is difficult to believe this is the case – it is increasingly important to take action now in order to keep more of what you make.
For more information and/or advice please email firstname.lastname@example.org