June 21, 2013

Demystifying Personal Tax Returns

A tax return is a document that contains the declaration of tax liability and is filed with HM Revenue & Customs in the UK. Contractors and employees working with Umbrella Companies do not need to file tax returns. This is because the Umbrella Companies withholds the right amount of tax liability before releasing their payments and as such they are not required to file any returns.

Individuals who are self-employed, receive foreign income, company director and are trustees are required to file tax returns annually. It is advisable that these individuals seek the services of qualified tax consultants. A tax consultant will give you sound advice on tax matters as well as help you in preparing and filing the returns. Tax consultants are high skilled and experienced personnel with an extensive knowledge of tax issues and therefore they are in a better position to give you comprehensive and sound advice on taxation. They will also ensure that the computation of your tax liability is done accurately. Paying a tax consultant can be expensive and as such some individuals prefer to file the returns on their own.

If you opt to file personal tax returns on your own, it is of paramount importance that you have a good grip on the subject matter. The good news is that you can file returns online. This is very convenient because you do everything at the comfort of your home. In addition, filling returns online is easy since the figures are calculated automatically and you are in a position to know how much you owe HM Revenue & Custom immediately. You must register first with HM Revenue & Custom so that they can give you a Unique Taxpayer Reference which is the reference number you use to file your returns.

In the United Kingdom, tax year runs up to the 5th of April. The tax returns must be completed by midnight 31st October for individuals who file their returns by paper after the end of the tax year and by midnight 31st January for those who file their returns online. This means that if you are filing your returns online you have 3 more months to do that. It is worth mentioning that the deadline for the submission of tax returns may be later if the HM Revenue & Custom have sent you a letter with an extension of the deadline.

When you are filing tax returns on your own whether online or on paper, you have to ensure that the document reaches HM Revenue & Revenue on time. Failure to do this will cost you £100 as penalty and the more you delay in submitting the returns the more penalties and interest you will pay.  The payments for all returns must reach HM Revenue & Custom by 31st January after the end of the tax year, that is, for 2012/2013 the tax returns dues must be paid by 31st January, 2014. The only exception is for individuals who had received a letter from HM Revenue & Custom giving them an extension of submitting their returns. Failure to make payments on time will attract penalties as well as interests on the unpaid amount. It is worth mentioning that the interest accrues until HM Revenue & Custom receives the payment. To avoid all these hassles as a contractor, it is recommended that you work with Umbrella Companies.

About the author: Robert Thick is an accountant for small to medium size businesses.

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