January — don’t miss the tax deadlines
31 January is an important deadline for individuals and Trusts, as 2005/06 Tax Returns must be completed and filed by this date.
Tax Return deadline
The 31 January is the last day for filing your 2005/06 Tax Return. If you have not completed your Tax Return yet, you should look at getting it completed now. You will need details of all income earned during the year, such as P60s and P11Ds from any employment, income and expenditure for any trades or properties rented out, certificates of bank interest and dividend vouchers etc, and also details of any assets sold during the year that may be liable to Capital Gains Tax. If you find out now that you are missing anything you may be able to request it now in order to complete your Tax Return before the deadline, but if you leave it until the last minute you may find you can’t get all the information you need.
If your Tax Return is complex and you want to ensure that it is completed correctly and you pay the right amount of tax, we would recommend using a professional. They may also be able to save you tax by advising on appropriate tax reliefs you may be eligible for. We are happy to assist you, but please remember that we can’t perform miracles and complete Tax Returns if we don’t have all the information! We can of course help you by advising you exactly what is needed, but with the deadline looming we would be keen to hear from you sooner rather than later.
Penalties for missing the deadline
Taxpayers not filing their Tax Return by 31 January will be liable for a £100 penalty if they have an outstanding tax liability. If you will be unable to file your Tax Return by the deadline you can avoid paying the £100 penalty by estimating and paying your tax liability for the year. This is because the penalty is the lower of £100 and any outstanding tax as at 31 January, so if you are using estimated figures do err on the side of caution as an underpayment may still mean a penalty is due. Any overpayments can be reclaimed at a later date when the Tax Return has been filed and processed.
Payments on Account
Payments on Account for 2006/07 are due on 31 January and 31 July 2007, and will be calculated using your 2005/06 tax liability. If your profits and income were higher than usual in 2005/06 this may result in you having a larger tax liability on 31 January, and this has a knock on effect on the payments on account for 2006/07. If your circumstances have changed and you anticipate that your profits and income will go down in 2006/07 then you can make a claim to HM Revenue and Customs to reduce the payments on account and advise them the amounts you will be paying. Go carefully though, as if you underestimate the amount of tax due you will have to pay interest on the shortfall.
Pension contributions reduce the tax liabilities of higher rate taxpayers, so if you are planning to make any significant pension contributions before 5 April 2007 then it may be worth considering reducing payments on account for 2006/07. Don’t forget that the limits on the amounts you can put into a pension have been raised from 6 April 2006, and you can now pay in up to your total earnings, subject to a cap of £215,000.
Our Tax team here at Old Mill are happy to assist with any tax issues you may have.