HMRC registration for filing tax returns

HMRC registration for filing tax returnsI have just received my Unique Taxpayer Reference (UTR) number as I need to file a tax return this year. What is the next step to filing my tax return?

Richard, Banbury

2010/11 tax returns may be submitted on paper, but the deadline of 31st October has already passed for paper returns.  Tax returns can now be filed online and the deadline for online filing is 31st January 2012. Any tax returns submitted after this date, will be charged with an automatic filing penalty of £100.

The next step now that you have your Unique Taxpayer Reference (UTR) number is to register for HM Revenue & Customs’ Online Services and obtain an Activation Code. Please note, it can take seven working days to receive your Activation Code, which means you must register by 21st January 2012 in order to obtain your Code in time for the filing deadline of 31st January 2012.  You must also pay any tax owed by 31st January 2012 otherwise interest on the amount owed will be charged on a daily basis until this is settled.

Alternatively, an accountant can file your tax return for you provided they use specific software- even if you haven’t completed the official form to authorise them to deal with your affairs.

Using an accountant can save you tax, stress and time. If you would like to speak with your local TaxAssist Accountant, please feel free to contact us to arrange a meeting.

We provide tax and accountancy services in Banbury and throughout the UK - http://www.taxassist.co.uk

Reducing Payments on Account

Q: I have now received my tax bill for payment on account due at the end of July. Last year my business made substantial profits, but this year I have incurred lots of expenditure and as a result my business profits have fallen. Is there any scope to reduce these payments and what are the ramifications if I do not pay on time?

James, Ipswich

A: Payments on account are represented by 50% of the individual’s net tax liability for the previous year, and are used to “prepay” the tax liability due in the following January. They are made up of two payments which are due in January and July. All individuals are liable to make these payments unless their net tax liability is less than £1,000 or more than 80% of the tax due was deducted at source.

Given that your net profit and subsequent tax liability for the 2009/10 tax year is likely to be significantly less than the previous tax year (2008/09) on which the payments on account are based, you can make a claim to reduce them. The amount that you reduce these to should reflect your estimation of the tax liability for the 2009/10 tax year, which is due for payment on the 31st January 2011. Either you or your accountant can make this claim using a form SA303 available from HMRC.

However, be warned if it is later found that you have overestimated the fall in your income, and consequently paid too little, you will be liable to pay interest on the difference between the amounts paid as payments on account and the amount actually due. Equally, if you have overestimated, you will be due a tax refund for the year and receive an interest supplement.

We provide tax accountancy services in Ipswich and throughout the UK.  http://www.taxassist.co.uk

Tax Returns and Providing Information Over the Phone

Q: My tax affairs are quite simple in that I am employed and my only other source of income is approximately £2,600 per annum from a rental property that I own jointly with my brother. He has received a tax return to complete for the 2009/10 tax year. Should I also have one to complete?

Lindsay, Aldershot

A: Many individuals with relatively simple tax affairs are now able to deal directly with Her Majesty's Revenue & Customs (HMRC) by telephone and this can dispense with the need to file an annual tax return.

You can notify HMRC of any changes in personal circumstances by telephone, including changes which may affect any claims to personal allowances you are entitled to and of any changes to your employment or self-employment status.  This service can also be used to advise HMRC of any sources of untaxed income where that income will not exceed £2,500 per annum.

Where untaxed income exceeds £2,500, it is necessary for the individual to complete and file a self assessment tax return. As your rental income is £2,600, you should therefore contact your local tax office and ask them to issue a tax return form to you. Before completing your tax return form you should consider seeking advice from an accountant. They will be able to review your circumstances to ensure that you claim any reliefs and deductions available, in order to minimise your liability to tax.

We provide tax accountancy services in Aldershot and throughout the UK.  http://www.taxassist.co.uk

Do I Still Need A Tax Return?

Q: Last year I completed my tax return but received a letter from my tax office stating that I do not need to complete a tax return in the future. However, I purchased a rental property during the 2009/10 tax year and have been renting this out for a small profit. Should I continue to file a tax return even though they have not issued me with one?

Richard, Newcastle

A: There is a requirement to notify the tax office by 5th October following any tax year where you owe further tax in addition to any tax that has already been deducted at source. As you have made a small profit from your rental income activities then you need to notify the HMRC. This gives them enough time establish if a tax return is required and to issue you with one to complete.

However, HM Revenue & Customs are trying to reduce the burden of Self Assessment on taxpayers who have straightforward affairs and have identified some areas where a tax return will still not required.

If your income from rents is less than £2,500 for the year and your other income is from employment where tax is deducted at source, you can just contact the tax office and they should be able to settle your additional tax liability through an adjustment in your PAYE code, and collect the underpaid tax through deductions in your wages each month. This will avoid the onerous task of completing a tax return to show this small amount of income.

Advising of Rental Property Income

Q: I started renting out a property a number of years ago, and due to the fall in interest rates have recently made a profit. In previous years I have always incurred losses. I haven’t ever completed a tax return as I am in PAYE employment. How should I notify the HMRC of this additional income?

Lewis, Sunderland

A: If a taxpayer receives any taxable income in a tax year of which HM Revenue & Customs is unaware, then they have a legal duty to “notify of chargeability” to tax by 5 October following the end of the tax year in which the income was received.

The HMRC recently published guidance explaining that a lot of straightforward work can be dealt with over the phone to avoid the administrative burden of completing a tax return.

They explained that clients with net property income (that is income after expenses incurred) of £2,500 can use this facility, as they will make an adjustment through your PAYE code to recover the tax due. For more complicated matters they insist on receiving notification in writing.

You mentioned that you made a loss on the property in previous years. Even though you have not been asked to fill out a tax return, you should still notify HMRC of any losses, as you can offset these losses now that you have made a profit from the rental business.

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Property Accounting Advice from TaxAssist Accountants