January, 2011

One million more people to be affected by tax mistakes

Just when you thought that HM Revenue and Customs’ (HMRC) tax problems were over, there has been further news this week that another million tax payers will be told that they have overpaid or underpaid tax after further tax code errors.

The Daily Telegraph reported that ‘the victims will join nearly six million people sent revised demands last year after a new computer system picked up on the errors dating back to 2008’.

5.7 million tax payers already affected

In late 2010, HMRC confessed to errors affecting a staggering 5.7 million taxpayers.  These were mainly due to incorrect tax codes being applied to tax payers since 2008.  Of these people, 1.4 million people had paid too little tax and faced a bill averaging almost £1,500.  The remaining 4.3 million people received a tax refund averaging £419.

Since the original set of tax blunders, HMRC has been checking almost eighteen million cases over overpaid or underpaid tax from 2004 to 2008.

Now, a Government insider has told The Sun newspaper: “At least one million more will learn they too are on the wrong tax code. Some have overpaid and some have underpaid. It is another tax fiasco.”

Some tax debts written off as it is ‘too difficult’ to claim the cash

The Daily Telegraph reports that ‘it is understood that as many as two million people have had their tax debts written off – in a move costing £500 million – because it was “too difficult” to retrieve the cash.’

An HMRC spokesman told newspaper:  “HMRC has committed to closing off old tax cases as quickly and accurately as possible. This means most people will get repayment cheques but a minority will have some tax to pay. This is only fair and will enable us to move forward to a more accurate and responsive tax system.”

If you owe tax, you have up to three years to make the repayment.  If you owe less than £2,000 under the new demands, you will be given a new tax code between now and March 2011.  Your repayments will then be taken each month for 12 months.  If you owe more than £2,000, you have until 31 January, 2012 to pay a lump sum.

If you are set to receive tax, there has been no announcement on the timeline for the refunds of this money.

An HMRC spokeswoman said: “We are continuing our programme of resolving outstanding cases with improved accuracy.”

However, some MPs are angry about the continued tax mistakes.  Liberal Democrat Treasury spokesman Matthew Oakeshott said: “HMRC just lurches from one crisis to the next. Any business that ran its affairs like this would have gone bust years ago.”

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HM Tax Return


The  HM Tax return deadline is fast approaching. If you fail to complete a tax return by the 31st January deadline you will be issued an automatic £100 fine, so get organised, sort out all your income and expenses for the previous tax year and make sure you have submitted by midnight on 31st January.

Do you know if you need to complete a tax return this year?

There  is often confusion as to who needs to complete a tax return. Some people believe that because they are student or because they are under the age of 18 then they are exempt but this is not necessarily the case.

Most people who have a regular job will pay tax through their employers PAYE accounting system. If, however, you were self employed during the previous tax year, you will need to complete a tax return to let HM Revenue know how much you earned and allow them to calculate the tax due on this income.

There are a number of other reasons why you might need to complete an HM tax return, including: being a company owner, a minister of religion, having earnings from savings and investments of over £10,000, income from property of over £2,500, an income of over £100,000 as well as if you need to pay any capital gains tax, for example from the sale of property of investments.

If you have any questions about completing a tax return form this year please leave them in the comments box below.


Inland Revenue Tax Returns for 2011


When you work for a company and pay your tax through PAYE , you usually will not have to undertake the laborious process of completing a self assessment tax return. However, if you run your own business, an organization director or for those who have earnings coming from real estate, retirement benefits or assets, you might have to submit a tax return, and just so that you know, the deadline is fast approaching!

Completing your taxes doesn’t have to be a complicated practice. Just follow some of the tips in our guide below:

Do you have to complete a tax return For 2011?

Not everybody would need to submit a tax return with HMRC.. Typically the most frequently found factors that would require you to complete a tax return in 2011 are:

•             You are self employed or a sole trader

•             You have got income from abroad that happen to be liable to tax here in the UK.

•             You owe Capital Gains Tax from the sale of a property or shares

•             You have income of over £10,000 coming from property or savings/investments

Completing your Tax Return

In the event that you are required by the Inland Revenue to complete a tax return , you’ve got two options of how you are going to do this. The first option is to complete a traditional paper based tax return, the deadline for which is ealier. The alternative options it complete your tax return online, where you liability for tax will be calculated for you and you will be given three months extra time to complete it. If you would like to complete your tax return online you will need to register with HMRC, if you are using a tax return accountant they will be able to complete the online tax return procerss for you.If you choose to submit your tax return online you will get an extra three months in which to file your return. Your tax will be calculated automatically and you will also receive an acknowledgement that HMRC have received the return.

Your Two Options

The self assessment tax return 2011 has two main sections within it:

•             Core pages which everybody needs to fill out

•             Supplementary/additional sheets

You need to complete all of the additional pages that may be relevant for your specific scenarios. Most of these documents consist of earnings coming from real estate, earnings as a result of saving interest as well as assets, CGT and and income that you may have from a pension.

Regardless of whether you actually complete a paper based tax return or you use the online option, you will need to make sure that you have submitted every one of the applicable pages. In cases where it’s a paper based tax return, don’t fail to remember to sign and date it, as this is one of the most common errors that HMRC sees.

Don’t forget the Tax Return Deadline

The due date to complete your tax return by is:

•             Paper based tax returns – 31st October (or three months from the time the Inland Revenue sent you a notice to complete a tax return ) whichever may be the later

•             Online tax returns – 31st January (or three months from the day of your notice to complete a tax return) whatever may be the later

Remember, if you fail to complete your tax return by the dates above, there i an automatic penalty of £100, so get yourself organise and complete your tax return today.

How do I complete a tax return?

You’ll be able to complete a tax return yourself if you know how or if you follow the guidance of the Inland Revenue. Otherwise you can make use of a tax return professional who’ll complete the return on your behalf. Click on the link if you would like help completing your self assessment tax return online


Tax Payable When Renting Property


With London being the only place in the UK to escape decreases in property prices, more and more people are renting second properties, waiting for the property market to pick up. We have created a list of common questions and answers about the tax payable when renting your house or apartment and what expenses you can claim against:

Have I got to complete a tax return when I’m renting property?

If the income that you make from your property lettings is in excess of £2,500 within the tax year (April 6th, until April 5th of the following year), you will have to complete a tax return. In the event the rental earnings are below £2,500 and you’re working and pay income tax through PAYE, it is possible to speak to your local tax office to modify your PAYE tax code and you may not be required to complete a tax return.

What are the allowed expenses/costs for letting a property

When you rent a property, house or apartment, you are able to lower your tax burden through offsetting any permitted expenses related to the property.. These expenses might include:

+ letting agent’s, and lawyers/legal costs

+ building and contents insurance fees

+ mortgage loan interest

+ upkeep and maintenance -improvement expenditures will not be permitted

+ rent, ground rent and property or home service expenses

+ Local authority or council Taxes

+ Advertising and marketing your property to let

+ Additional fees for example telephone calls

+ How do you group my letting property costs?

When your earnings from your rental property is under £15,000 annually before deducting any allowable expenses, it is possible to group all of them as a individual overall total when you complete your tax return.. When your costs are over £15,000 you will have to group all of them individually and also complete a full tax return, not the shorter version.

How long should I keep my records for my rental property records for?

It is important to continue to keep any kind of records and information with regards to your rental property tax return for 6 years following the tax year for which that it was due.

Can you offset mortgage payments against property income?

You can deduct any interest only mortgage payments from your rental income, to calculate the profit that you earned from the property. Once you have deducted all allowable expses such as interest mortgage payments you will be left with the profit which you will be taxed on.

What time of year should I submit tax returns for renting property?

The deadline to complete a paper based tax return is 31st October. If you are complete your tax return online you are given three extra months to complete your return, with the deadline being 31st January. Make sure that you give yourself enough time to collect all your information that you need for your tax return.


Reclaim Back Your Petrol Costs For Work

Does your employer ask you to make work related journeys in your own car or are you self employed and use your car for work? Often you can claim a rebate on petrol/fuel and other related travel expenses. We answer a number of questions below on claiming back tax on petrol expenses:

Can I claim back my petrol/fuel expenses from my employment?

This will depend upon your current circumstance. In the event that you are driving a vehicle supplied by your company then you won’t be able to make a claim. If however you are making use of your own personal vehicle then there’s a good possibility that you could make a claim for this expense.

How much should I be allowed to claim for business mileage for using my own car?

A tax refund on business vehicle usage will be worked out at 40 pence per mile for the first 10,000 miles and 25 pence for any additional miles subsequent to this. You need to remember to deduct any payment which you may have been given from your company for using your own vehicle from this calculation. So for instance in the event you travel 25,000 miles annually, you’d be eligible for petrol/vehicle tax relief of:

(10,000 x £0.40) + (15,000 x £0.25) = £7,750

What happens if my company has compensated me for driving my car?

Any compensation that you receive from your company needs to be deducted from the tax relief calculation. So taking the example above, if your company paid you £2,500 during the tax year to use your own car for work related journeys you would have an adjusted tax rebate of £5,250.

How do I calculate my petrol tax rebate?

Find the amount of your tax relief, using the calculation method above and then multiple it by your marginal rate of tax. If you’re a basic tax rate payer it will be 20%. So from the above example you’ll be eligible for a tax rebate on business mileage of:

£5,250 x 20% =£1,050

Is there a petrol Rebate Form to Claim my Mileage?

If you’re self-employed, you can just include the above any allowable work related expenses in your tax return. Remember to keep a record of the mileage that you have completed. Alternatively you could make an application for a claim with HMRC by submitting a tax return.

If you are self-employed can you claim for train fares to and from clients?

If you are self employed you can claim back the cost of any work related allowable expenses such as travelling between clients.

Self Assessment Tax Return 2011


With the start of another year it can only mean one thing….the online tax return season is coming soon. This short article offers some tips on filling out your tax return this year. Remember if you do not complete your tax return by the end of this month, you will be due a £100 fine. If you can’t find the answer you would like, leave a comment below.

Do I need to complete a self assessment tax return in 2011?
There can be a variety of factors why HMRC may need a person to complete a tax return. Some reasons include:

+ Becoming self-employed in the 2009/2010 tax year.
+ Residing or being employed overseas
+ Company owner
+ A minister of religion (of any faith)
+ Earnings coming from savings and assets over £10,000
+ Earnings through renting real estate of £2,500 or higher
+ Earnings due to the estate of a deceased individual
+ Offshore Earnings
+ Yearly earnings exceeding £100,000 or higher
+ For those who have Capital Gains Tax (CGT) to be charged for
+ If you wish to claim expenses/expenditures or relief’s

How do I complete my tax return?
If you know how, it is quite possible to complete a tax return on your own. Alternatively, if you prefer, you can easily use a tax return advisor who’ll carry out the return on your behalf.The advantage of having someone to complete your tax return for you is that they will take all the stress of having to deal with HMRC and ensure that you have the documents that you need to submit all the required documents. Click the link if you would like to learn more about having someone assist completing your 2011 self assessment tax return.

When is the deadline for doing a tax return?
The due date just for paper based tax returns is 31 October. If you want to complete your tax return online, you will be given an extra 3 months and the deadline will be extended until the 31st January. It is recommended that you do not wait until the last minute to complete your tax return as there maybe delays in collecting information and facts about your income, expenses and assets.

Is there a penalty for not submitting a tax return in time?
If HMRC does not receive your tax return by midnight on 31st January, you’ll instantly be given a £100 fine. In the event that you also pay your tax late you can expect to be charged interest from the date the tax bill was due right up until your tax payment had been received.

Where can I get a Self Assessment Tax Return Form?
If you are using a tax accountant to complete your tax return, they will provide you with all the forms that you need. Paper based tax returns which should have been completed before 31st October can be downloaded here.

What is the difference between a Short Tax Return Form and a Regular One?
Depending on the complexity of your tax affairs you may be eligible to complete a short tax return form instead of a full one.

Disclaimer: The above mentioned information can’t be used as help and advice and it is for illustration reasons only. Please phone Tax Fix before making any claims or confirmation. Tax Fix can not accept any liability for action taken and any losses incurred.


4 Common Tax Forms You Should Know

If you are an employee, there are certain tax forms that your employer is obliged to provide you with.  These forms contain important information about your salary, benefits and the tax you have paid and so you should know what information each of these forms contains.

P45

You receive a P45 from your employer when you stop working for them.  It is a record of your pay and the tax that has been deducted from it from the start of the tax year to the date of the end of your employment.

Information contained on a P45 form includes:

  • your tax code and PAYE (Pay As You Earn) reference number
  • the date you left your employment
  • your total earnings in the current tax year
  • your National Insurance number
  • how much tax you paid on your earnings

A P45 is made up of four parts.  Your employer sends Part 1 to HMRC and gives you Parts 1A, Part 2 and Part 3.  You keep Part 1A and you give Part 2 and Part 3 to your new employer or to the Jobcentre if you are claiming Jobseeker’s Allowance.

You should automatically receive a P45 when you cease working for an employer.  You are entitled to it by law.

P11D

Your employer uses a P11D form to tell HM Revenue and Customs about the value of any ‘benefits in kind’ that you have received during the tax year.  ‘Benefits in kind’ are perks that effectively increase your income, such as:

  • private health insurance
  • a company car
  • interest free loans

Your employer will only declare them if you have earned at least £8,500 in the year, including the value of the benefits.  Your employer works out the value of each benefit before reporting it to HMRC.  You will also receive a copy for your records.

P46

There are some instances where you won’t have a P45 when you start a new job.  For example, you may be starting your first job or you may be taking on a second job without giving up your other one.  In this situation, your new employer will give you a form P46 to complete.

A P46 contains information such as:

  • whether you have got another job
  • whether you have been claiming Jobseeker’s Allowance
  • whether you are paying off a student loan
  • whether this is your first job

P60

Your P60 is the summary of your pay and the tax that has been deducted from it in the tax year.

Your employer should give you a P60 to keep at the end of every tax year (which runs from 6 April to 5 April the next year). Again, you are entitled by law to receive a P60 if you are still working for your employer at the end of the tax year.

Your P60 is useful if you have to complete a Self Assessment tax return or two claim back any tax you have overpaid.  You may also need your P60 to prove your income to a lender if you are applying for a mortgage or other loan.

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