A stress-free Christmas (at least as far as tax returns are concerned) depends on being organised well in advance of deadlines, so you can relax and enjoy things.

It’s an area that still causes some confusion, so we asked Inca director Graham Carson to answer some of the most common questions we get asked:

Q1: HMRC haven’t advised me that I need to do a tax return. Does this mean I don’t need to?

It’s important to understand that it’s your responsibility to know whether or not you need to complete a tax return – not HMRC’s. The reality is that there are many different circumstances which may require you to complete a return. Your own situation is likely to change from time to time, and HMRC can’t be expected to know details.  

You definitely DO need to complete a return if you are:

Be aware that this is not an exhaustive list. If you want to know whether you should be completing a tax return, HMRC have an easy to use online checker tool you can use at https://www.gov.uk/check-if-you-need-a-tax-return.

If you’re still not sure, just give me a call!

Q2: How do I notify HMRC that I need to complete a return & request forms?

You can do this via the HMRC website. If you’re filing a return because of property or dividend income, or because you are a director of a limited company, you need to register for self-assessment. The other option, for people who run a business – typically as a sole trader is to register for self-employment.

If you prefer, Inca can take care of the registration process for a nominal fee of £50 (+ VAT).

Q3: What do I need in order to be able to prepare & file my tax return?

The most important piece of information you will need to have before you can complete your tax return is your UTR (Unique Tax Reference) number. To obtain your UTR you will need to register with HMRC for self-assessment, or as self-employed. Once a UTR has been assigned to you, it will normally stay with you for life.

Important note: This essential reference can take up to 3 weeks to obtain, so it’s vital to register for your UTR as soon as possible. Without it you will not be able to file your return. If you receive a late filing penalty as a result, you will have to appeal to have this removed.

Q4: How much will it cost for Inca to do my tax return for me?

It depends how complex your tax affairs are, all we need to do is ask you a few questions in order to provide you with a bespoke quote.

Q5: When do I have to submit my tax return to HMRC?

At the risk of spoiling Christmas, there are two deadlines you need to be aware of:

Q6: When will I have to pay my tax?

If you’re paying any tax due as a lump sum, payment needs to be made by 31^st January (so 31^st January 2016, for tax due on income earned in the tax year 2014-15). Any later than this and you will become liable for interest and penalties.

Q7: Should I wait for HMRC to send me my tax bill?

If you file your return close to the January deadline, it’s highly likely there won’t be enough time for HMRC to acknowledge your return, calculate what you owe, and send a bill out to you. Wait for it to arrive and you’re likely to be late making payment and will incur interest and penalties. For this reason, you should make payment as soon as possible, and not wait for a bill to arrive.

If Inca is looking after your return for you, we’ll be able to confirm exactly how much is due, so you can make payment without having to wait for a bill.

Q8: What happens if I overpay?

If for any reason you find you have made an overpayment to HMRC, you can select either to have a refund, or if you are likely to have to make a payment towards your tax bill for next year (see below re ‘payments on account’), you can offset any overpayment against it.

Q9: What are ‘payments on account’?

If you pay your tax in instalments rather than through PAYE, and if the amount of tax you owe in a year exceeds £1,000, HMRC will want to arrange for you to pay your tax sooner than you would normally i.e. 10 months after the end of the tax year.

Basing their calculation on the assumption that the tax you’re going to owe for the current financial year will be the same as the bill for your previous year, HMRC will ask you to make two equal payments on account – the first on 31^st January, and the balance on 31^st July.

Q10: Does paying on account mean I’m paying tax in advance?

No it doesn’t. A self-employed individual paying tax on account is still considerably advantaged in terms of cash flow compared to someone paying via PAYE. While a salaried employee will pay tax in the month they earn it, someone who is self-employed will not have to pay the first 50% of their tax until 10 months into the tax year, and the balance 4 months after it has ended. 

Q11: I’m a company director, but I don’t earn money from my directorship – do I need to complete a tax return?

Yes. If you’re a director of a UK limited company, you must file a tax return, and this applies whether you take a salary, a dividend, expenses – or nothing at all. Even if you’re a director of a ‘dormant’ limited company, you are required to prepare and submit a return. The only exception to this is if you are a director of a charity – and don’t draw any money from it, or benefit financially in any way.

Q12: My spouse is my company secretary – does he/she need to file a return?

Acting as a company secretary does not in itself require a person to complete a tax return, but of course there may be other reasons for them needing to do so. They might for example be a share-holder and need to complete a return due to receipt of dividends.

Hopefully, you won’t be spending Christmas worrying about your tax return, but if we have not answered the question you wanted to ask, just give us a call. And if you have left things a bit later than you meant to, and you simply want to hand completion and submission of your return to us so you can enjoy a stress-free break, don’t leave it any longer – get in touch with us now!