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52 Ways To Save Tax #31

Pay less taxEven if you have taken all the steps possible to reduce the amount of tax that you pay, you could still end up paying too much. If you have overpaid, there are ways in which you can obtain a tax rebate and get back the money that is due to you.

In the latest part of our “52 Ways to Save Tax” series, we look at how you pay less tax by claiming back overpaid money that you’re owed.

52 Ways to Save Tax – Part 31: Claim back the tax you have overpaid

There are a number of reasons why you might have paid too much tax. These include:

  • Your employer has deducted too much tax from your pay
  • You are on a low income and you have paid tax on savings interest
  • You sent a tax return and have paid too much tax
  • You have used your own money for your job (for example on work clothing or fuel)
  • You live in one country and have an income in another
  • You were on the wrong tax code for part of the tax year

Claiming back overpaid tax if you’re on PAYE

If too much tax was taken from your PAYE income, you may be able to claim a refund. How you make a claim depends on the tax year in which you paid too much tax. You can make a claim for a tax rebate back to the 2013/14 tax year.

  • 2017/18 tax year – Tell HMRC if your tax code is wrong. If you are due a tax refund, your employer will give you this in your pay.
  • 2016/17 tax year – HMRC will post you a P800 tax calculation if they know you have paid too much tax. You can either claim your refund online or you may receive a cheque.
  • 2015/16 and earlier tax years – You may be able to claim online. You will need your employer’s PAYE number (this is on your P60) and details of any table income/benefits you received.

Claiming back overpaid tax if you sent a tax return

If you submit a tax return, you may still have paid too much tax. You may have:

  • Entered the wrong amount when you paid your tax bill
  • Made a chance to your tax return after you submitted it
  • Stopped being self-employed and have payments on account

If you submitted your tax return online you should log into your HMRC account and ‘request a repayment’ of the tax you have overpaid.

If you submitted a paper tax return, you should call or write to HMRC and explain why you think you paid too much tax. Include your Unique Taxpayer Reference when you write, and you may also need your bank details in order that your tax rebate can be paid directly into your UK bank account.

Tax Fix can help you get the tax rebate that you are owed. Get in touch with us today to find out how we can help.

52 Ways To Save Tax #13

Pay less tax

Pay less tax by sending in your tax return on time

In our series we’ve been looking at easy ways for you to reduce the amount of tax that you pay. As well as using legitimate means to cut your tax bill, making sure you are organised and that you file your tax return on time can also help trim the amount you owe HMRC.

Keep reading to find out how paying your tax bill on time can save you hundreds of pounds.

52 Ways to Save Tax – Part 13 : Pay your tax on time

If you have to submit a self-assessment tax return then there are deadlines for sending in your information. These are:

  • Paper tax return – midnight on 31 October
  • Online tax return – midnight on 31 January

For example, for the tax year that ended on 5 April 2015 you have to submit your paper tax return by 31 October 2015 or your online tax return by 31 January 2016.

You also have to pay any tax that you owe by the 31 January deadline.

If you don’t file your tax return on time, you will face a penalty. You’ll get a penalty of £100 if your tax return is up to 3 months late and you will have to pay more if it’s later, or if you pay your tax bill late.

If you take longer to submit your return you can face a daily £10 penalty – which is capped at 90 days, or £900 – as well as interest on the amount outstanding.

HMRC figures show that 890,000 people missed the 31 January 2015 deadline for submitting their self-assessment tax returns, immediately adding £100 to the bill of almost a million people.

In some cases HMRC will waive the penalty. Reasonable excuses for failing to meet the submission deadline include:

  • the death of a partner
  • an unexpected stay in hospital
  • issues with the online HMRC service
  • fire
  • unpredicted postal delays
  • computer or software failure when preparing your tax return

In these cases HMRC may waive your penalty. Reports in May 2015 suggested that HMRC were waiving more of the penalties than normal if people provided a reasonable reason why they did not submit their tax return on time. However, simply submitting late may still see you pay at least £100 more than you have to.

Paying a surcharge on your VAT

It’s not just your income tax bill that may go up if you don’t pay on time. If you’re a VAT registered business then you can also face penalties if you don’t pay your VAT by the deadline.

HM Revenue and Customs (HMRC) record a ‘default’ if:

  • they don’t receive your VAT return by the deadline
  • full payment for the VAT due on your return hasn’t reached their account by the deadline

If you default you may enter a 12 month ‘surcharge’ period and if you default again during that period you could face a penalty.

For example, if you have a turnover of less than £150,000 you can face a 2% VAT surcharge if you default three times during a 12 month period.

You can also face a £400 fine for sending in a paper VAT return unless HMRC has told you that you are exempt from online submission.

All this means one thing: if you send your tax returns on time and make payments when they are due your tax bill will end up being lower.

52 Ways to Save Tax #11

Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than £325,000 when they die. Currently charged at a rate of 40 per cent, an inheritance tax bill on a large estate can run into tens or even hundreds of thousands of pounds.

However, there are ways of reducing your inheritance tax liability by making gifts while you are alive. In the next part of our series ‘52 Ways to Save Tax’ we look how you can pay less tax by giving money away. Keep reading to find out more.

52 Ways to Save Tax – Part 11: Give money away

There are several ways of making gifts and reducing your potential tax bill. These include:

Giving small gifts

In each tax year, you can gift up to £250 to as many people as you like, completely free of Inheritance Tax. Wedding gifts and individual gifts up to this amount can be given to as many different people as you wish.

Remember that you can’t give a larger sum of money and claim exemption for the first £250.

Give up to £3,000 every year

As well as the individual £250 gift limit you can also give away £3,000 in total each tax year – although you can’t combine these two allowances with gifts to the same person.

The estate won’t pay any Inheritance Tax on up to £3,000 worth of gifts given away by the deceased in each tax year (6 April to 5 April). This is called your ‘annual exemption’.

If you don’t use your annual exemption you can carry it over into the next tax year, but the maximum exemption is £6,000.

Give a wedding gift

Wedding or civil partnership ceremony gifts are also exempt from inheritance tax – although there are limits to this:

  • Parents can each give cash or gifts worth up to £5,000
  • Grandparents and great grandparents can each give cash or gifts worth up to £2,500
  • Anyone else can give cash or gifts worth £1,000

In order to qualify for this exemption you will need to give this gift (or promise to give it) on or shortly before the date of the wedding or civil partnership ceremony.

Give regular gifts from your income

There is no Inheritance Tax to pay on gifts from the deceased’s income (after they paid tax) as long as they had enough money to maintain their normal lifestyle. Such gifts may include:

  • Christmas, birthday and wedding/civil partnership anniversary presents
  • Life insurance policy premiums
  • Regular payments into a savings account

Give a gift to charity or a political party

Gifts to UK charities are also tax-free. The deceased person’s estate will pay Inheritance Tax on gifts to charities, museums, universities or community amateur sports clubs.

In addition, there is no Inheritance Tax to pay on a gift to a political party as long as they have either:

  • 2 members elected to the House of Commons
  • 1 member elected to the House of Commons and received at least 150,000 votes in a general election

52 Ways to Save Tax #10

If you sell an asset for a profit then you may have to pay tax on the money that you make. This is called ‘Capital Gains Tax’ and could leave you with a sizeable tax bill if you sell shares, antiques or investment property for a profit.

In the next part of our series ‘52 Ways to Save Tax’ we look how you can pay less tax by using your annual Capital Gains Tax allowances. Keep reading to find out more.

52 Ways to Save Tax – Part 10: Use your Capital Gains Tax allowance

Capital Gains Tax (CGT) is the tax that you pay on the profit that you make when you dispose of an asset. Remember that any tax that is due is paid on the ‘gain’, not the whole amount you sell the asset for.

For example, you buy a painting for £10,000 and sell it for £50,000. The ‘gain’ you make is £40,000 and any CGT that is due would be paid on this amount.

It is not just selling an asset that creates a potential Capital Gains Tax liability. You may also have to pay tax if you gift an item to someone else, swap it for another asset or if you got compensated for it (for example if you received an insurance payout because an asset was destroyed).

When you may have to pay Capital Gains Tax

You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell/dispose of a personal possession for £6,000 or more. Assets on which CGT may be payable include:

  • Jewellery
  • Paintings
  • Shares not held in an ISA or PEP
  • Antiques
  • Stamps and coins
  • Property that is not your main residence

When you don’t pay Capital Gains Tax

There are certain items that are exempt from Capital Gains Tax and certain annual exemptions that you can use. These will help you to dispose of an asset on which you have made a gain without having to pay any tax.

You don’t pay CGT on:

  • NISAs, ISAs or PEPs
  • Betting, lottery or pools winnings
  • UK Government gilts
  • Premium bonds
  • Personal possessions with a lifespan of less than 50 years
  • Most gifts to your husband, wife, civil partner or a charity
  • Your car – unless you’ve used it for business

You also have an annual Capital Gains Tax allowance, called the Annual Exempt Amount. This means that you only have to pay Capital Gains Tax on your overall gains above your tax-free allowance which, in the tax year 2014/15, was £11,000.

Working out your gains

You won’t pay any Capital Gains Tax if your total taxable gains are below your annual Capital Gains Tax allowance (£11,000 in the 2014/15 tax year). To work out what your gains are you should:

  • Work out the gain you have made on each asset that you have disposed of in the last tax year (shares, personal possessions etc)
  • Add together the gains to make a total
  • Deduct any allowable losses

If your total gains are below your allowance you won’t have any Capital Gains Tax to pay.

If your gain is above the CGT allowance then you will have some tax to pay. The basic rate of CGT is 18 per cent although higher rate taxpayers – which may include you if your gains added to your other income carry you into the higher band – pay 28 per cent.

52 Ways to Save Tax: #9

Do you have a spare room in your home? If so, renting it out can be an easy way for you to reduce your tax bill. In the next part of our series ‘52 Ways to Save Tax’ we look how you can reduce your earnings by taking in a lodger.

Keep reading to find out how using the ‘Rent a Room’ scheme can help you to pay less tax.

52 Ways to Save Tax – Part 9: Rent out your spare room

If you own a rental property then you are generally taxed on the income you receive less any allowable expenses. However, if you let out furnished accommodation in your home then you are entitled to a tax break.

If you rent out a room in your home then you may be eligible for the ‘Rent a Room’ scheme. This scheme allows you to earn up to a threshold of £4,250 per year tax-free from letting out furnished accommodation in your home. You can let out a room or an entire floor of your home.

You can opt in to the ‘Rent a Room’ scheme at any time if you are a resident landlord or if you run a guest house or a bed and breakfast. It is worth remembering that you don’t have to be a homeowner to take advantage of this scheme. If you are a tenant yourself you can also lease out a room to a lodger, as long as your own lease allows you to do so.

If you do own your home you should check with your mortgage lender (if you have one) to ensure that you are allowed to rent out a room under the terms of your home loan.

How you can earn £4,250 without paying tax

If the income you receive from renting a room is less than the threshold (currently £4,250) then you are automatically exempt from paying tax on this amount. You do not have to complete a tax return.

If you earn more than the threshold then you must complete a tax return to declare the income. You will opt into the ‘Rent a Room’ scheme and claim your tax-free allowance via your tax return.

Bear in mind that the income (and the threshold) is halved if you share the income with your partner or someone else.

Two things to bear in mind

As well as the rent you charge for the room you may wish to also charge for services such as providing meals or laundry services.

Any income you receive from these services must be added to the rent you receive for tax purposes. If the total income from rent and other charges exceeds the threshold (currently £4,250) and your overall income is greater than the individual Personal Allowance, you will need to pay some tax.

Your responsibilities as a landlord are to keep the property safe and in good repair. Your tenant does not have the right to challenge the agreed rent and you don’t have to give as much notice to end a letting than if you rented out the property as a whole.

 

Are you paying the right amount of tax on your rental income?


If you are a landlord and own a rental property, you probably have to pay tax on your rental income. However, a new campaign by HM Revenue and Customs is targeting up to 1.5 million landlords who may have failed to pay or underpaid the tax that they owe.

HMRC estimates that landlords are underpaying by around £500 million each year. So, we look at when you have to pay income tax and what the repercussions are if you don’t pay the tax that you owe.

How to work out if you should pay tax on your rental income

Many landlords earn significant income from rental property, particularly if their homes are in London or the South East. The graph below shows the average rental income in the UK regions and even in the areas that generate the least rental income landlords can expect to earn in excess of £6,000 a year from rental income.

 Average monthly rents in UK

If you earn rental income then the tax you will pay is worked out as follows:

1. Add up all the rental income you receive from your rental property/properties

2. Add up all your allowable tax expenses (as detailed below)

3. Take your allowable expenses from your income

Your allowable tax expenses include mortgage interest payments, lettings agent’s fees, buildings insurance, repairs and maintenance to the property, ground rent and service charges.

If you are an employee on PAYE and your net profit from property is under £2,500, you do not have to complete a self-assessment tax return.  Your tax code can be altered to claim the tax you owe.  You will have to complete HMRC form P810 every year.

If you are not on PAYE, or it your net profit from property is above £2,500, you will have to complete a self-assessment tax return.  If your net profit from property is under £77,000 you can group all the income and expenses as one figure on your tax return.

If your total income from UK property is over £77,000 (20012/13) or more in a tax year you must declare it on the property pages of your Self Assessment tax return and show your expenses separately.

HMRC targeting landlords who haven’t paid the right tax

If you have not paid tax on your rental income then you may be able to take advantage of an 18 month tax amnesty. HMRC have announced that penalties on unpaid tax will be reduced for those landlords that come forward and have warned that anyone who fails to pay tax could face criminal proceedings.

Marian Wilson, head of HMRC Campaigns, said: “All rent from letting out a residential property or holiday home has to be declared for income tax purposes. Telling us is simple and straightforward.

“We appreciate some people will have made honest mistakes, and some may not be fully aware that the rent from a property is taxable, and that is why it always makes sense to talk to us so we can help. It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling.

“The message for all landlords owing tax is simple – it is better to come to us before we come to you.”


Some Ways To Pay Less Tax On Your Savings


Taxes are a fact of life. But, while you may not be able to avoid paying tax on your income, your shopping or your property, you may be able to earn tax-free interest on your savings.

If you’re a basic rate taxpayer, you’re probably paying 20 per cent tax on your savings interest. And, if you are a higher earner you may be losing 40 or 50 per cent of your savings returns to tax. If you want to ensure you’re getting the very best return on your savings it is vital that they are tax-efficient. Our guide gives you three great tips to paying less tax on your savings.

Maximise your ISA contributions

On 6 April 1999, the government introduced the Individual Savings Account (ISA). This type of account lets you save a certain amount of money each year and you’ll pay no tax on your returns.

In the 2012/13 tax year, the individual ISA allowance is £11,280. You can save up to £5,640 as cash and the remainder in stocks and shares. And, crucially, any money that you place in an ISA will earn gross rather than net interest. This ensures you don’t lose 20 per cent (or 40/50 per cent if you are a higher rate taxpayer) of your interest in tax.

From April 2013 the individual ISA limit rises to £5,760.

There are hundreds of ISAs available and, even if you don’t have the maximum to save, they are a great way of sheltering your savings from tax. Always consider using your ISA allowance before you put your savings elsewhere.

Register for gross interest if you’re not a taxpayer

If you’re not a UK taxpayer, you shouldn’t be paying tax on your savings interest. So, if you earn less than the threshold for paying tax – around £155 per week for under 65s – you should receive ‘gross’ rather than ‘net’ interest.

To do this, you need to speak to your bank or building society and complete a R85 form. This will register you for gross interest and ensure no tax is taken off before you receive your interest.

Take advantage of your partner or child’s tax status

If you have a partner than pays a lower rate of tax then you – perhaps they are a non-taxpayer – you could save your money in your partner’s name in order to benefit from paying less tax.

For example, you may be a higher-rate taxpayer and pay 40 per cent of your savings interest in tax. If your partner is a basic-rate taxpayer and only pays 20 per cent, you can save your money in your partner’s name and only pay 20 per cent tax.

Bear in mind that if you do this your savings will be in your partner’s sole name. Make sure you understand the implications of this before you decide on this course of action.

Another way to reduce the tax you pay on your savings is to open an account in your child’s name. If they earn less than the tax-free allowance then you can build up their savings without any tax being deducted. As above, your child will need to sign a R85 form (or you will need to sign it on their behalf).

You should remember that such an account has to be opened only with the express purpose of saving for your child. There are also restrictions on how much you can gift to your child without paying tax.


Should MPs have to publish their tax returns?


 

After the MP’s expenses scandal, many people called for politicians to publish their tax return in order that the public can see that they are paying a fair amount of tax. However, while the Prime Minister, David Cameron, has indicated he would be happy for MPs to be forced to publish their tax affairs, nothing has been done.

The French President has recently moved to require ministers in France to publish details of their financial affairs. So, is it time that British politicians released their tax details?

French President insists that ministers release tax affairs into public domain

Francois Hollande, the French President, has moved to require ministers to publicise their tax details after a recent scandal. The President acted after tax fraud charges were laid against the former budget minister Jérôme Cahuzac, the man charged with fighting tax evasion.

Cahuzac admitted having a secret Swiss bank account and so ministers will now be required to publish their financial details. The Guardian reports that ‘some cabinet ministers have already made public their extraordinary personal wealth.’

With French ministers about to publish their tax affairs, should British MPs follow suit?

Backlash from Cabinet ministers means it is unlikely we’ll see their tax details

Asked about the French President’s move, the prime minister’s spokesman said: “The prime minister’s view on whether he would be content to publish his arrangements and those of other ministers is that he would be relaxed about that.

“His view is unchanged. He would be relaxed about doing so.”

Last spring, Cameron’s aides said he would look at publishing his returns and those of three of the most senior MPs – the foreign secretary, William Hague, the chancellor, George Osborne, and the deputy prime minister, Nick Clegg.

In April 2012, George Osborne told the Daily Telegraph: “My own personal principle has been, make the rules in general more transparent. And, of course, comply with those rules.

“We are very happy to consider publishing tax returns for people seeking the highest offices in the land. Of course, they do it in America.”

The main argument against publishing MPs tax returns is that it would breach taxpayer confidentiality. The Guardian reports that ‘it had originally been suggested that all cabinet ministers would be required to publish, but a backlash from middle-ranking cabinet ministers ensued.’

Mr Osborne admitted to the Telegraph: “You have to think through the advantages and disadvantages. We have got to think through the issue of taxpayer confidentiality, which is a very important principle in Britain.”

The Chancellor has also recently denied that he is an additional rate taxpayer and so would have personally benefited from the recent cut in the top rate of tax from 50p to 45p.

He said: “On the last tax return that I filled in [covering the 2010-11 tax year], I was not a 50p taxpayer … And, no doubt, next time I fill in a tax return, I will be asked the question, and will give you a straightforward answer then.”

What do you think? Should MPs be obliged to publish their tax returns? Or, should they benefit from the same confidentiality and privacy as any other taxpayer? Please share your comments below.


Warning: Will You Miss The 2012 Tax Return Deadline?


Do you want to submit your 2012 tax return by post? If so, the deadline for paper-based tax returns is getting closer. While more and more people are submitting their tax return online, millions of UK taxpayers still send a paper based tax return to HMRC.

The deadline for a paper tax return is 31st October 2012. Keep reading to find out how many people now submit their tax return online and what your options are.

How do Brits submit their tax returns?

Official figures from HM Revenue & Customs (HMRC) in 2012 showed that a record 9.45 million taxpayers met the deadline for submission of their tax returns. Over 90 per cent of taxpayers filed their self assessment forms before the deadline – a rise of 4 per cent on the previous year.

And, a record number of people submitted their tax return online in 2011. The chart below shows how Brits submitted their tax returns for the 2011/12 tax year:


David Gauke, Exchequer Secretary to the Treasury, said: “I’m delighted so many people filed their tax returns online this year. The record number proves that it’s quick, easy and secure to do.

“HMRC has always been clear that they want returns not penalties, so it is good news that over 90 per cent of all returns were submitted on time.”

Do you need to complete a tax return?

HMRC will have contacted you earlier this year if you need to complete a tax return. You will most commonly need to do so if you’re self employed or you have various sources of income.

If you haven’t received a tax return and think you should have, you should contact HMRC as soon as possible. Similarly, if you have been asked to complete a tax return and you don’t think you need to, get in touch with them.

If you have previously sent your tax return on paper, you’ll receive a paper tax return. However, this doesn’t mean you have to submit a paper return this year. Submitting your tax return online has various benefits – including allowing you extra time to submit your return. Keep reading to learn more.

The 2012 tax return deadlines

If you want to submit a paper based tax return, it must be received at HMRC by midnight on 31st October 2012.

The only exception to this is if you received the letter telling you to send a tax return after 31st July 2012. If this is the case you have three months from the date that you received that letter.

If you miss the deadline for sending in your paper based tax return, you can still submit your return online. The deadline for submitting your tax return online is 31st January 2013 and so you still have three months in which to submit your tax return.

Get your paper tax return done now

If you are planning to submit a paper based tax return then it is vital that you complete the form and send it to HMRC by 31st October 2012. If you miss the 31st October deadline then you will have no choice but to submit your tax return electronically.


Warning: Self Assessment Tax Return 2011 Deadline Approaching


Have you submitted your tax return yet?

If not, the deadline for your Self Assessment is fast approaching.  In most cases, you have to submit your return online by midnight on 31st January 2012 and there are penalties if you are late.

Keep reading to find out more about the deadline, what to do if you’re new to online filing and some tips for completing your online tax return.

The 31st January deadline

You have to send your online tax return by midnight on Tuesday 31st January 2012.

Don’t send a paper tax return now as the deadline for paper returns was 31 October 2011. You’ll have to pay a £100 penalty straight away if you do and so you should send it online instead.

The only time you can send your return later than this is if you received your tax return, or the letter telling you to complete a tax return, after 31 October 2011. If this applies to you then you will have three months from the date you received the letter.

If you’re new to online filing

If you have never submitted your tax return online before then you need to start the process very soon.  This is because you will have to register to use HMRC’s online services first.

You should register to use HMRC’s online service by 21st January 2012.  This allows HMRC sufficient time to send your Activation Code to you before you start using the service.

3 tips for using the HMRC Online system

Here are three useful tips for using HMRC Online Services:

  • Have your user ID and password to hand – Make sure you know how to log into the system and don’t leave it until the last minute
  • Deal with error messages immediately – When completing your online tax return, it is advised that you correct any errors straight away.  It is often a simple error such as using text or punctuation that the online service does not accept
  • Submit your return – You don’t have to complete your tax return in one go.  You can save your progress and come back to the return at a later date.  However, don’t forget to actually push the button and submit the return to HMRC once it is completed.  When you submit your return you will be asked to re-enter your User ID and password.  You will also get an on-screen acknowledgement that your return has been sent

Penalties for being late

If you don’t submit your online tax return by the 31st January deadline then you will be liable to pay a penalty.

The penalty is £100 and you will pay this even if you have paid the tax you owe or your return is just a day late.

The penalties then increase the longer your tax return is late.  There is a subsequent penalty of £10 per day that your tax return is late for up to three months.  This means that if you submit your tax return three months late your total penalty will be £1,000.

You then have to pay further penalties if your tax return is up to six or twelve months late.  The total penalty could exceed £1,600.