Five tips for completing that dreaded tax return…
It’s that time of the year again… that dreaded tax return. The deadline is fast approaching.
For many people the delay is caused by the fact that the relevant paperwork is in a mess; they’ve misplaced countless receipts and they cannot for the life of them find their log-in password.
So, while “tax return” is, of course, on your to-do list, I thought I would compile a little list to make this whole experience a bit less painful for you.
Set up a tax file
Turned the house upside down to find missing papers for your tax return?
Avoid a repeat performance next year. Set up a file — or box or even carrier bag — marked “tax”. When any paperwork relevant to your tax return shows up, shove it in your file, along with a copy of this year’s return.
Similarly, set up tax folders on your email account, so you can file relevant emails and electronic documents when they arrive. Come next January, it will be much easier to find the figures you need.
Get ‘appy
If you share the government’s enthusiasm to make tax digital, you can even download smartphone apps to help with your return.
For example, those who are self-employed can use a free app such as 1Tap Receipts to take photographs of receipts for business expenses and store them securely.
It then allows you to extract automatically the supplier, date, payment amount and even the self-assessment tax category.
You can also email digital invoices to the app for processing, share the information with an accountant and see the totals for expense categories.
File by December 30 to spread payments
You can spread the cost of a tax bill of less than £3,000 across your monthly payslips if you are on the pay-as-you-earn (PAYE) system, but only if you file your return on paper by October 31 or online by December 30. Paying via your PAYE tax code means you will not face a big bill in the depths of January. It can work for anyone with a PAYE code, so not just employees but also people receiving a company pension.
Take advantage of new allowances
Grab the chance to earn extra income without paying tax, using the new personal savings allowance and dividend allowance.
Since April 2016, basic-rate taxpayers have been able to earn up to £1,000 in interest on savings before paying tax, while higher-rate taxpayers can earn up to £500 tax-free. Additional-rate taxpayers do not get any allowance.
It means most people will no longer need to pay tax on savings interest, particularly given the pathetic amount of interest paid on many accounts at the moment.
All taxpayers will also be able to earn up to £5,000 in dividends on shares tax-free.
Meanwhile, if you let a furnished room in your home to a lodger or via Airbnb, you can now earn up to £7,500 a year before paying tax, since Rent a Room relief was pushed up last April.
Prepare for changes to buy-to-let
Landlords should brace themselves for tax changes that will erode profits on buy-to-let.
The “wear and tear” allowance has been scrapped; it used to allow landlords to offset 10% of their rental income against tax for maintenance, even if they had not spent a penny on repairs. Since April 2016 they have been able to claim the cost of wear and tear only if the improvements have taken place. Receipts will be needed.
Other changes to buy-to-let — notably the change in mortgage interest tax relief — will not come into effect until April and so will not affect your next tax return, which will be for the 2016-17 tax year.
So there you have it – no excuses! If you have any questions about anything I’ve mentioned here, you know what to do! Head to the contact page.
– Bronny
bronwin@askbronny.com
