Four steps to completing your tax return
It's that time of year again - your tax return is due. Make sure you get it in on time as HM Revenue & Customs (HMRC) has brought in tougher penalties for latecomers.
1. Create an account
The paper deadline has already passed so you'll have to fill out your tax return online. Register at online.hmrc.gov.uk: you'll need your unique taxpayer reference (UTR), a 10-digit tax reference number - you will find it on any of your paperwork from HMRC - plus your national insurance number or postcode.
Once you've registered, your user ID will be displayed - make a note of this as it's the only time you'll see it. An activation code will then be posted to you; this can take up to a week so register by mid-January.
2. Be prepared
Gather together pension contributions, charity gifts, savings and information on any other sources of income such as a buy-to-let property. If you're filling out a tax return for supplementary work on top of a regular job, ask your employer for your P60 to find out how much tax you've paid through your salary.
3. Know the deadline
The deadline for online self-assessment is midnight on 31 January 2012. But if you owe less than £3,000 and you want any of this taken through your tax code, the deadline was 30 December 2011.
4. Beware the penalties
File your return one day late and you'll instantly owe £100 - even if you don't owe any tax. After three months, you'll be fined £10 for each subsequent day, capped at £900. After six months, you'll pay an extra 5% of tax owed or £300 (whichever is the greater). This process is repeated again if you are 12 months late.
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.