From an analysis of self assessment queries on AccountingWEB and its own customer support lines, TaxCalc compiled the answers to the top 10 commonly asked questions surrounding self assessment.
The tips that follow are drawn from the company's SimpleStep Guide to Self Assessment. AccountingWEB. To see if you are in need of any last-minute technical advice, check your answers to the questions that follow.
1. What is the best way for my client to pay tax?
Although you can pay smaller amounts via tax code deductions, the December deadline for this has now passed. Instead, taxpayers will need to use direct debit, debit/credit cards or internet payments. Make sure to factor in up to three working days to process these payments and note that HMRC adds a 1.4% a surcharge if paying with a credit card.
2. What are the penalties for submitting a return after 31 January?
Firstly, a fine of £100 will be automatically levied if the tax return isn't submitted on time, whether tax is due or not. From then on, the penalties start escalating according to the following formula:
- Over three months: Fixed penalty, plus £10 for each following day over three months (up to a 90 day maximum of £900)
- Over six months: Above penalties, plus £300 or 5% of tax due, whichever is higher
- Over 12 months late: Above penalties, plus £300 or 5% of tax due, whichever is higher
- Interest will also be charged on any tax paid late
3. What are the rules for carrying forward pension allowances?
If your client's pension contributions exceed the annual allowance of £50,000 in the current tax year, they can use up the unused allowance for the previous three tax years. use the earliest of the three years first, and if there is an excess amount after the allowances are used, your client will be liable to a tax charge on this.
4. How do I enter or check student loan repayments?
Student loan repayments are calculated on total income received. This information has to be entered on the tax return if repayments have been deducted by an employer and/or the repayments are due on any other income. Enter the details on page 2 of the SA100, under the Student Loan Repayments section.
5. Where do I enter the tax code on the tax return?
Tax codes are based on a person's personal allowance, adjusted for estimated pension contributions or benefits, tax over/underpayments and the like. At year end, HMRC and tax return software take an individual's income and benefits received and deduct the personal allowances they are entitled to so the can work out how much tax they should pay, or be repaid to them.
6. Why does my client have a tax liability in relation to gift aid donations?
If your client has made gift aid donations, these are regarded as if the basic tax rate has been deducted by the client. The charity takes the deduction and claims the basic rate tax as an additional donation. A tax liability may arise if a client hasn't paid enough tax throughout the year to cover that element of charity donations.
7. Why are there no payments on accounts being calculated?
The Revenue has increased the threshold for taxpayers when they need to start making payments on account to £1,000. No payments on account are needed if more than 80% of the assessed tax is met by income tax deducted at source.
8. Why has the personal allowance been reduced?
According to TaxCalc, if a client's net adjusted income is over £100,000, then their personal allowance is reduced by £1 for every £2 over £100,000. If the net adjusted income is therefore greater than or equal to £114,950, the personal allowance will be reduced to nothing.
9. Why has the age allowance been reduced?
If your client is over 65, then they may qualify for an extra age-related allowance on top of their personal allowance of £7,475. The allowance has two rates, depending on your client's date of birth.
10. How far back can I submit a tax return online?
You can submit a tax return online for the 2008/9 tax year onward.
If you want to refresh your memor on any of these points, download the TaxCalc SimpleStep Guide to Self Assessment.