Top Ten Tax Tips
Are you totally new to taxes, or do you just hate tackling your tax return?
Well, the UK tax system is mind-bogglingly complex, but if you can’t afford a clever accountant, it’s worth getting to grips with the basics, and avoiding a mad scramble to put your affairs in order at the very last minute.
Read our top ten tax tips – the do’s and don’ts and deadlines, to help you get organised and pay the right amount at the right time.
1. Do you need to do a tax return?
If you’re self-employed, you need to register with and complete an annual self assessment tax return, whether you are making a profit or loss.
If you’re employed, tax is normally deducted automatically from your salary through PAYE (Pay As You Earn scheme). But there are situations where you may also need to file a tax return, if you earn income from other sources e.g. freelancing or renting out a room.
If you’re unemployed but received income, you may need to pay tax via self assessment.
Use this HMRC tool to check if you need to file a tax return for this 2017-18 tax year.
Generally, it’s a yes if any of the following apply:
- You earned £2,500 or more in untaxed income e.g. from freelancing or renting out property
- You earned over £10,000 from savings interest or investments
- Your taxable income was over £100,000
- You owe capital gains tax on the profit you made from selling certain investments like valuables, shares or a second home. (In 2017-18 tax year, capital gains under £11,300 are tax-free)
- You were a company director (unless it was a non-profit organisation and you received no pay nor benefits)
- Yours or your partner’s income was over £50,000, and one of you claimed child benefit
2. Stay informed
3. Get help & advice
This guide gives general tax information, but you should seek help and advice relevant to your own circumstances.
- Visit the HMRC website or call their helpline on 0300 200 3310
- Or see our consolidated list of useful contacts and online resources; we have included fee-charging professional tax advisers, but many of the listed sources are free, so do check them out if you’re struggling with tax matters.
4. Register in good time
If you need to file a tax return for the first time, you will need to register with HMRC for Self Assessment. The registration process can take several weeks, so allow plenty of time in order to meet the deadlines for tax returns and payments.
5. Don’t miss deadlines
Procrastination could be costly! Be aware of deadlines for completing your tax return and paying any tax owed, or you could face penalties for a late tax return (£100) and interest on any overdue tax.
Key deadlines for this tax year: 6 April 2017 – 5 April 2018
Self Assessment payment helpline
: 0300 200 3822
Call HMRC if you have missed your tax payment date
6. Check your tax code
If you are an employee (full-time or part-time), you will have a PAYE tax code. It’s a series of numbers and letters on your payslip, which tells your employer how much tax should be deducted from your pay, before the money even reaches your bank account. e.g. the tax code 1185L indicates you have the standard Personal Allowance of £11,850 tax-free income.
Check you are on the right tax code with MSE’s Tax Code Calculator. If your code is wrong, you could be paying too much or too little tax, so you should inform HMRC:
It’s generally easiest to resolve the situation by calling their helpline on 0300 200 3300.
Alternatively, you can use HMRC online services
Find out more about tax codes at GOV.UK
7. Get organised
Collect all the info you need, ready to complete your tax return e.g. your PAYE tax code, P60 or , employer and pension provider details, tax certificates for investments.
For self-employed, you will need bank statements, invoices, expenses etc. You need to keep accurate records of all income and outgoings for your business.
8. Make sure it’s official
If you file your tax return online, make sure you use the official free HMRC site.
Beware of copycat sites who may charge hefty fees for the service!
Beware of HMRC phishing and scams: You will never get an email, text or phone call from HMRC, telling you about a tax rebate or penalty (they would notify you by post), or asking for personal or payment details. Don’t give out any private information, click on links or download attachments.
Dealing with HMRC scams – GOV.UK
How to identify and report HMRC phishing & scams
9. Budget for tax payments
The deadline for paying any tax you owe is 31 January.
If you’re self-employed, use the HMRC Ready Reckoner tool to estimate your tax and National Insurance bill, and work out how much money to put aside each month, so you have funds available to pay your tax on time.
For other taxpayers, estimate your gross income, then use this simple Tax Calculator to work out what you will pay over the year in Income Tax, National Insurance and Student Loan repayments, and how much is your remaining take-home pay.
10. Don’t forget your student loan
Once you start earning over £25,000, you will need to start repaying your student loan via the tax system.
If you’re in employment, HMRC normally instructs your employer to start deducting repayments directly from your salary, via the PAYE system.
If you pay tax through self-assessment, you must tick the Student Loan box on your tax return. HMRC will calculate the amount to be repaid along with your tax bill.
Make sure you keep the Student Loans Company informed of your contact address and employment information, because otherwise they might impose a penalty interest rate for ‘failing to respond to requests for information or “losing touch” with the company.’ You can check your student loan repayments and balance via their website, and you can apply for a refund if you have overpaid.
Find out more about tax matters: