The tax year for 2023/24 ended on 5 April 2024, and acting now will give you plenty of time to avoid making any of the common mistakes often made when completing a tax return. So, now is a good time to gather your tax documents and get your tax return completed with time in hand for those quirks and queries to be addressed. Knowing your liabilities in advance makes for good cash flow planning when those payments become due. Don't forget, payments on account need to be paid by 31 July.
Our Accountant in St Albans, Chris Wallace, lists the different elements that will need to be accounted for on your tax return, or independently of your tax return.
Might you have made a mistake on your tax return? Take a read through the following common mistakes and review tax returns made in the last 12 months. If you’ve made a mistake, you have time to rectify it. Follow this link if you need to change your return.
Don’t forget to report property gains
If you made a taxable gain on residential property which gives rise to a CGT liability, then it should have been reported to HMRC online within 60 days of completion. If you had problems with the system, as many others had, you may have resorted to reporting by letter or perhaps on form PPDCGT.
Confusingly, this system operates independently of self-assessment, so you must now repeat the information in the capital gains tax section of the return. Taxpayers must then hope HMRC will manage to match it up with the payment previously made.
Avoid falling into a Trust tax trap
A similar problem can arise if you are the beneficiary of a trust. Depending on the type of trust, you may have to declare the income or gains on your self-assessment return.
However, you may be able to claim a repayment where the trustees have paid tax. If you are in this position, it is worth checking with your local accountant about paying and reclaiming tax on trusts.
Our accountants provide this service for clients in St Albans and Watford.
Higher earners should claim their full pension relief allowance
Personal pension contributions to a self-invested personal pension, known as a SIPP, are made with basic-rate income tax relief given at source, but you will miss out on any higher-rate relief if you do not complete the box to claim this on your return.
This is the only way to reclaim this tax and you can go back and claim for previous years, so don't miss out.
Double check your pension contributions
On the subject of pensions, the lifetime allowance may have gone, but many taxpayers are being trapped by the annual allowance tax charge. Although the allowance rose to £60,000 in April, it was £40,000 a year for 2022/23, or equal to your salary, whatever is lowest.
With the additional complications of the high income allowance taper and carry forward exemptions for unused allowance, it is easy to calculate the wrong amount for your tax return.
Our accountants have seen a steady increase in clients asking about SIPPs and pensions investment figures with their tax return submission in mind. Make sure you consult a professional to ensure you are maximising your pension relief and avoiding any potential pitfalls.
Child benefit becomes a cost
The child benefit rules are some of the most perverse to ever come out of a Budget. Forget about the High Income Child Benefit Tax Charge at your peril. You may need to repay this partially, or in full, via your tax return.
If you or your partner have claimed it and your income was over £50,000 (£60,000 from April 2024), it will need to be declared on your self-assessment return. That is unless your partner had higher income and reported it themselves.
We’ve seen a few clients caught out having claimed Child Benefit mistakenly. The common mistake is a lack of knowledge on the subject when a review of Child Benefits is presented. Your accountant can assess you and your partner's earnings and provide advice.
Pay tax due on your company shares
More people are benefiting from company share incentive schemes. Unless the scheme is a qualifying tax favoured scheme, there is a charge to income tax when you become beneficially entitled to the shares, based on the market value of those shares.
This amount should be included as income on the tax return. However, for shares in a listed company this will have been dealt with under their pay-as-you-earn system, usually with a sell to cover arrangement.
In effect, the share award is treated as a bonus with income tax and National Insurance (NI) applying on the share value less any payment you made for them. Sufficient shares are then sold in the market to reimburse your employer for the tax and NI. For your tax return you need to check that your P60 takes this “bonus” into account.
Reclaim double taxes on overseas income
Foreign income can be complicated. This is particularly the case with dividends on shares where tax has been withheld overseas. Many overseas companies withhold tax at a higher rate than the reduced rate set under the relevant double taxation treaty.
Unfortunately, you can only claim relief on your tax return at this reduced rate. You will then need to make a separate reclaim from the overseas tax authority for the difference.
These are not be the only ways you fall foul of the tax system, there are cases where taxpayers have submitted returns on paper by the October 31 deadline last year, as they are entitled to do, but have not yet been sent details of the tax due.
HMRC has encouraged online filing because this saves them money but some people do not trust the tax authority with digital information following earlier data breaches. HMRC must not ignore those who choose paper filing.
Do you need advice to avoid making tax return mistakes?
To avoid common tax return mistakes, you may need advice from your accountant. Your accountant will usually present you with a questionnaire that covers the basics for the paperwork required to complete your tax return on your behalf. However, if your accountant isn’t aware of all your pensions, for instance, or historical Child Benefit payments to yourself or your spouse, mistakes can creep in.
At Visionary, our accountants make it our business to understand your full financial picture. We ask the questions to avoid the common mistakes. So, if you need help with your tax return, give your local accountant in St Albans a call on 01727 730550 or drop us an email at enquiries@visionaryaccountants.co.uk.