Remember to fill in your tax return
It's that time of year again; in among the Christmas festivities you need to fill out your tax return. The deadline is 31 January.
Make sure you get it in on time, otherwise you face hefty penalties. Here's how to get it sorted.
1. Set up an account
The paper deadline has been and gone (31 October) so you will have to fill out an online self-assessment tax return. To start, you will need to register with the HM Revenue & Customs (HMRC) website at online.hmrc.gov.uk if you haven't already done so.
You will need your unique taxpayer reference, which can be found on any paperwork you have from HMRC. You'll also need your national insurance number.
After you have registered you will see your user ID displayed on screen. Be sure to make a note of this. You will then receive an activation code in the post - this might take several days so make sure you start well ahead of the deadline.
2. Sort your paperwork
You'll need a few things to hand to fill out your tax return, including details of pension contributions, charity gifts, savings and all your sources of income, including investments and buy-to-let properties.
If you are employed and are only filling out a return to cover supplementary work you'll also need your P60 from your employer. It shows how much tax you've paid through your salary.
3. Don't miss the deadline
The deadline for completing your return and paying what you owe is midnight on 31 January 2013. If you owe less than £3,000 and want HMRC to collect it through your tax code then the deadline is 30 December 2012.
If you do miss the cut offyou'll be charged £100 if it is only a day late, and £10 for every day after that up to a 90-day maximum of £900. If it is more than six months late a further £300 or 5% (whichever is higher) of the tax due is charged. And you'll have to pay all of these penalties even if you have no tax to pay but have to file a self-assessment form.
Used by an employer or pension provider to calculate the amount of tax to deduct from pay or pension. A tax code is usually made up of several numbers followed by a letter. If you replace the letter in your tax code with ‘9’ you will get the total amount of income you can earn in a year before paying tax, for example 747L would mean a person could earn up to £7,479 before paying tax. The wrong tax code could mean a person ends up paying too much or too little tax.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.