September deadline for tax returns
Tax is just another business expense
The September tax returns deadline is looming, and even though there is no £100 penalty for missing it there are certainly benefits to be had by filing early, not least of which is having the HMRC calculate how much tax you owe and giving you a month's warning for the payment.
If you feel like you are going to miss the deadline anyway then hopefully the following tips will help for the final deadline in January.
First off, letís explore the importance of checking the tax you pay and how to ensure you donít incur unnecessary fines.
1) Check the tax you pay
If you run a business, you will need to complete a tax return; however, your spouse or other family members on PAYE may not. They rely completely on HMRC getting it right Ė but does it?
A recent National Audit Office report highlights HMRC processing errors and that more than 1 million people paid the wrong amount of tax in 2006-07. Whilst some people paid too little, more than 500,000 people paid too much, on average £290 too much. Did you pay too much or too little?
Whether or not you have to complete a tax return, it is easy to check whether you or your family have paid too much tax, by using tax software such as TaxCalc.
2) Donít incur unnecessary fines
- Last year 10 per cent of returns were filed after the January 31 deadline, leaving the offenders open to fines of £100. HMRC is currently reviewing the fine and it may rise significantly in future years.
- Donít panic or delay. Take advantage of the holidays to collect up all the paperwork that you will need and must keep for the taxman, and then set aside some time to complete the tax return.
3) Donít incur unnecessary interest: plan your cash flow
- The income tax due for 2006/07 is due on January 31 2008. A payment on account of the 2007/08 liability will be payable on the same day. This is 50 per centof the previous tax year. In a businessís first year this means that your tax bill could be 150 per cent of the tax you owe. Make sure the cash is there to pay the bill.
- Interest will start to run immediately on unpaid tax. In addition, there is a five per cent surcharge on all tax still owed 28 days after the deadline (i.e. the end of February). This equates to an annual interest rate of 65 per cent. This surcharge is repeated in July.
4) Check what tax relief you are entitled to
- Donít believe everything you are told as there are lots of myths about what expenses can be claimed for tax purposes
- Tax relief is due only for expenses which are incurred wholly and exclusively for the purposes of the business, although in practice HMRC does allow proportionate claims to be made for assets like cars, which are used partly for business and partly for private purposes.
Andy Hardy is a former Tax Inspector and Development Director at TaxCalc.com, provider of tax software solutions.
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The Editor © Hardhatter 2007