December, 2011

4 Tax New Year’s Resolutions You Should Make

Millions of people make New Year’s resolutions every January.  Many of us aim to take more exercise or to lose weight but millions also resolve to change their financial behaviour in the coming year.

In 2010, The Observer reported that ‘more than half of us are planning new year’s resolutions, according to research from  And alongside losing weight and taking more exercise, fixing our finances is top of the list.’

While saving money and spending less are two great ways to help get your finances in order, ensuring you are on top of your tax is also a great way to keep control of your cash.  Keep reading for four tax New Year’s resolutions you should make in 2012.

Register for online tax returns

If you have to complete a Self Assessment tax return then you should consider registering for HM Revenue and Customs’ (HMRC) online service.  This is the alternative to submitting your tax return on a paper form.

There are lots of benefits to submitting your tax return online.  The main one is that you get an additional three months to submit your return: 31 January instead of 31 October.  In addition, you will receive an instant acknowledgement, your tax return will be processed more quickly and your tax is worked out for you as you are completing the return.

Open a savings account for your tax money

If you face a tax bill at the end of the year, it is a good idea to build up a cash lump sum throughout the year.  This ensures that you have the capital available to pay your tax bill and that you’re not left in a position where you can’t afford to pay what you owe.

It’s a good idea to open a high interest savings account – perhaps even a tax-free Individual Savings Account (ISA) – where you can save up smaller amounts as you earn money throughout the tax year.  You’ll benefit from a good rate of interest and be able to save up enough to pay your tax bill when you receive the payment demand.

Check you have the right accountant

When was the last time you thought about changing your accountant?  If your accountant does a great job for you at a competitive rate then you may be happy with them.

However, if you’re not 100% satisfied with your accountant, why not consider switching?  There are thousands of accountants in the UK that specialise in different business areas and charge different rates.  You may get a better service, more specialist knowledge or a lower bill if you switch to another accountant.

Improve your tax knowledge

Tax is a difficult subject.  With so many rules, regulations and requirements it can be tough to get your head round everything you need to know.

However, there is a lot that you can learn about the tax rules that affect you and your business.  Only by understanding the system can you maximise your deductions and reduce the amount of tax that you pay.

Sites such as Tax Fix have a wealth of resources designed to help you understand your tax better.

Everything You Should Know About Your Tax Return Form 2011

If you have to complete a tax return then there are a few things that you have to know.  For example, you should know the tax return deadline dates, how to submit your Self Assessment tax return and what the penalties are for a late submission.

So, if you have yet to submit your tax return form for 2011 then make sure you keep reading to learn more.

Do you have to complete a tax return form 2011?

If you have to complete a 2011/2012 tax return you will normally have received this request from HM Revenue and Customs (HMRC) earlier in 2011.  HMRC normally write to you in April if they think you have to complete a tax return.

This letter will also contain information about the 2011 tax return deadlines.

If you haven’t had such a letter and you think you may have to complete a tax return form 2011, you should contact them straight away.  Similarly, if you have received a request to self assess but you don’t think you should, get in touch with HMRC without delay.

The deadline for completing your 2011/12 tax return

If you wanted to submit a paper tax return it had to have reached HMRC by midnight on 31 October 2011.

The only time you can submit a paper tax return after this date is if you received the request to submit a tax return after 31 July 2011.  In this instance you have three months from the date that you received the letter.

So, if you haven’t submitted your tax return form 2011 yet, you will have to use HMRC’s online service.  And, your online tax return must reach HMRC by midnight on 31 January 2012.

Bear in mind that there’s an earlier deadline of 30 December 2011 if you owe less than £3,000 in tax and you want HMRC to collect any tax you owe through your tax code. HMRC will try to collect the tax due through your code, but they can’t always do so.

If you received the letter telling you to submit a tax return form 2011 after 31 October 2011, you have three months from the date you received that letter to submit your tax return online.

The penalties for not submitting your return on time

If you don’t submit your tax return form 2011 online by 31 January 2012 then you are likely to face a penalty.  If you miss the deadline then a fixed penalty of £100 will be levied. This applies even if you have no tax to pay or have paid the tax you owe.

For every subsequent day that your tax return is late you will be charged a penalty of £10 for each day – up to a 90 day maximum of £900. This is as well as the fixed penalty above and so if your tax return form 2011 is 90 days late you will face a total penalty of £1,000.

Pre completed tax return forms and online accounts planned as HMRC consults on new systems

HM Revenue and Customs (HMRC) has been strongly criticised over recent years for tax code problems, poor service and a failure to modernise the tax system in the UK.

Now, however, HMRC is attempting to drag the tax system into the 21st century by launching a consultation on the online elements of its modernisation.  HMRC wants to improve the personal tax system by improving access to information online and to make some of the online functions more straightforward and user-friendly.

Keep reading to learn more about what is planned and how it could affect you.

Three main improvements suggested in consultation paper

HMRC’s new consultation document was published in November 2011.  The Guardian reports that the paper ‘is part of the effort to create a simpler and more transparent personal tax and welfare system’.

The new online tax functions are being designed in line with a new real time information system at HMRC which will also be used for the new ‘universal credits’ system being considered by the Department for Work and Pensions.

The consultation paper is seeking public feedback on three main areas:

  • Self assessment – pre-completing tax returns for self assessment. The consultation asks what the most important areas are to pre-fill and whether there would be any benefits and risks to this system
  • Introducing ‘online accounts’ for individual Pay as you Earn (PAYE) taxpayers. This is designed to improve a person’s understanding of how their income is taxed but there are concerns about how many people would use such a system
  • Pre-completed tax statements for those who do not submit a self assessment tax return. The consultation wants to know whether these would be useful and, if so, what information should be included

Exchequer secretary David Gauke told the Guardian: “We plan to lift the lid on tax so that people understand how much they are paying, what their overall tax rate is, and what they should be paying, in the same way that the government has lifted the lid on what they are paying for.”

The consultation will remain open until 24 February 2012.

Would you use an online tax system? Would it be helpful for part of your Self Assessment to be pre-completed? Let us know in the comments below.