Don’t leave it to the last minuteIn the 2019/2020 tax year the deadline for completing and submitting tax returns online was 31 January 2021. Around 700,000 people waited until the last day to submit their returns, and over 26,000 people waited until the last hour to complete theirs. It’s not unusual to put off doing taxes, but when you wait until the last minute you run the risk of being stressed and frantic when you fill in the forms. Rushing through the steps could lead to missing vital information and losing out on savings – or worse, submitting the wrong information and being charged too much or being fined. The tax year ends in April and the deadline for submitting tax returns is the following January. Give yourself a chance to complete your forms properly and calmly by starting early. You could even submit them in May if you wanted to give yourself plenty of breathing room. Remember that when you fill out the forms online you are also able to pause the process and go back. Allowing yourself ample time to make changes means you have a chance to check anything that might be confusing or find any transactions that might not have been recorded properly.
Claim for everything that you canWhen it comes time to fill in your tax returns, most people want to finish theirs as soon as possible and get them out of the way. But spending a bit more time making claims could save you a lot of money. All businesses have running costs and certain expenses can be deducted from your final profit before tax is calculated on it. You can claim for almost anything, as long as it is being used for business purposes. The HMRC website has a list of expenses that can be claimed on. If you are working from home, then you can also claim on some of your household expenses. You can claim either a flat rate or calculate your costs based on how much time you spend in your home office and what utilities are being used. It may not seem like a lot at first, but if you are able to claim back on your home office, electricity, and office equipment, the amount can add up and save you more than you realise.
Don’t forget charitable givingTaxes are broken down into different rates depending on your earnings, a shown below:
|Tax Band||Taxable Income||Tax rate|
|Personal Allowance||Up to £12,570||0%|
|Basic Rate||£12,751 to £50,270||20%|
|Higher Rate||£50,271 to £150,000||40%|
|Additional Rate||Over £150,000||45%|
Create a PensionWhen you pay into a pension, the government tops up your payments with an extra 25% of what you’ve put in. You will need to set up the pension yourself and declare it on your self-assessment, but it’s an easy way to get money back in the form of an investment in your future. The 25% is also for basic rate payers – if you pay over the basic tax rate then you can claim for another 25% on top of that as well. There is a limit to the amount your pension will be topped up, so you can’t claim on more than £40,000 per year. But you can also claim for backdated pension contributions if you are reading about this for the first time.
Check your past returnsIf this is your first time approaching taxes early and you’re usually one of the last-minute 26,000, then this is one for you. If you have made a mistake on your tax returns from the past four years that mean a refund, you are able to claim a refund on tax overpayment. Claims can be made on the basis of mistakes in your original claim or new evidence of expenses you could have claimed on. In order to make your claim, you will need to write to HMRC to ask for “overpayment relief”. They will want to see proof that you overpaid through self-assessment, a signed declaration that you are telling the truth and you believe everything you are saying is accurate and correct, and instructions on how the repayment can be made.
Get an accountantOur final piece of advice is to hire someone. It may seem counterintuitive to hire a specialist if you are trying to save money but speaking with a tax consultant or specialist will help you understand exactly what you can claim on and how to claim. This will help you for years to come and will take a lot of pressure off you in the first year as you start navigating tax claims.
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