When it comes to filing a Tax Return, we understand there are a great deal of components to consider, which can often result in times of feeling overwhelmed by the strict rules and regulations put in place by HMRC to ensure you are paying your taxes correctly and on time. Here at Ultra Tax Ltd, we are here to help. We understand the complexity of this process and how daunting of a task it may seem to an individual struggling through this process and wish to put an end to this burden of uncertainty, relieving any unnecessary stress you may be facing.
Determine if You Need to File a Tax Return
Firstly, let’s start with who is required to file a tax return, following the guidance and regulations from HMRC. There are a range of different categories in which you may fall into, requiring you to complete a Tax Return. Depending on whether a tax return is a requirement for your situation, it is also important to understand the Tax year of which you are filing for. In the UK, the tax year runs from April 6th to April 5th of the following year. It is important to be aware of the deadline for filing your tax return to prevent any late penalty fees from HMRC. For online filing, it's usually January 31st following the end of the tax year.
Self-Employed or a Sole Trader:
If you're self-employed, a freelancer, or a sole trader, and earned more than £1,000 during the tax year, then you are required to file a Tax Return. This includes people who run their own business or work as freelancers or contractors. An example of this is an individual working within the construction industry who is registered with the Construction Industry Scheme (CIS).
Director of a Limited Company:
Being a director of a Limited Company also requires you to file a Tax Return to report your personal income received from the company.
High Income:
If your income is over £100,000, you are required to file a tax return even if you are employed and have already been paying tax over the year.
Income from Savings, Investments, or Rental Properties:
If you have any untaxed income, whether that be if you earned income from savings, investments, or property, this would require you to file a tax return with HMRC.
Gather Your Documents
Once you know that filing a tax return is indeed a requirement for you, it is extremely important for you to ensure that all the essential and necessary documents are gathered to allow for correct filing to represent the true and full display of your earnings for the specific tax year. These documents can differ depending on your personal situation and employment status, so it is impeccable for you to gather this information correctly.
Employed Income
If you are employed and are completing a tax return, the documents you would need to detail your income and tax paid through employment would be either a P60 or P45, and possibly a P11D. These documents clearly show the total income you have received and tax you have paid over the tax year which can be requested from your employer. Often the case with employed individuals, a tax return would be filed in the case of claiming for allowable expenses otherwise known as a tax rebate. Such expenses would include things like mileage, food allowance, cost of equipment etc. In this case, the individual would receive a certain amount of their tax paid to HMRC back in the form of a rebate. This is common among employments such as NHS or construction workers.
Self-Employed Income
If you are self-employed, you will need to gather all your business records of the income, you have received over the tax year. Whether that be in the from of kept copies of all the invoices and receipts for the services or products you provided, or payslips received if you are a sub-contractor. This is extremely important as this allows you to correctly state to HMRC the amount of total income you have received over the tax year, which the amount of tax you are legally obliged to pay to HMRC can then be calculated from this, keeping you in full compliance with the rules and regulations.
Expenses
In the UK, when filing a tax return, you can include various expenses that are directly related to your employment or self-employment. The types of expenses that can be included may vary depending on your specific situation, so it is important for you to understand which expenses apply to you and your situation as to whether they can be claimable or not. Expenses essentially are your friend; these provide the ability to reduce the total amount of the tax owed to HMRC or reclaim tax back in the case of a rebate. It's important to note that to be eligible for tax relief, expenses must be incurred "wholly, exclusively, and necessarily" for the purposes of your employment or business. Additionally, you should keep accurate records for 6 years of all expenses and retain receipts as evidence in case HMRC requests verification.
Types of expenses
There are a range of allowable expenses, we understand it may be confusing for individuals to distinguish what certifies as an “allowable” expense, not to mention, whether these apply to specific individuals in their specific circumstance. Firstly, it’s important to be aware of what is accepted as allowable expenses, then determine whether these expenses apply to you within your business or work role.
Employment Expenses:
Allowable expenses differ slightly depending on whether you are Self-Employed or Employed, it is imperative to understand the difference between these when completing a tax return to enable you to clearly distinguish what allowable expenses are necessary to you, and whether you can legally claim them. To give you a better understanding, we have put together a list of employment expenses:
• Uniforms, work clothing, and tools.
• Professional fees and subscriptions to professional bodies.
• Travel expenses for work-related journeys (not including commuting).
• Use of your own vehicle for work purposes, if you are travelling to multiple places of work over the year (mileage at £0.45 per mile*).
• Costs associated with working from home, if applicable.
Self-Employed Expenses:
Generally, with self-employment, there are a greater number of expenses which you may be eligible to claim for in comparison to employed expenses. Again, it is important to be aware of these expenses and determine whether you are eligible to claim for these, considering your specific situation. To help you through this process we have put together a list of self-employed expenses:
• Office rent, business rates, and utility bills.
• Office supplies and equipment.
• Marketing and advertising costs.
• Professional fees (e.g., accounting, legal).
• Travel expenses related to business activities.
• Cost of goods sold, or expenses directly related to providing goods or services.
• Use of home as office (portion of rent/mortgage, utility bills).
As you can see, this could seem like a daunting task for many, as this requires a wide range of understanding as to what expenses qualify as allowable for an individual’s situation. Following this, gathering all the information for each allowable expense over the year is essential, this is required to accurately calculate the total amount of expenses you can claim for. It is extremely important for this information to be correct to ensure you are maximising your expenses and not overpaying tax.
Quick tip – Mileage log
A quick tip from Ultra Tax Ltd, keeping a mileage log of the miles you are travelling each week will make this much smoother, whether that be you’re Employed and have had to use you own vehicle to travel to more than one place of work that week, a director of a company or sole trader travelling across the year for work related purposes. Keeping a mileage log each week for the miles you are traveling over the year will allow you to keep on top of your expenses, instead of having to round everything up through memory when it comes to end of the year when preparing to file your tax return.
You may now understand, from the information provided through this blog, filing a tax return requires a deep understanding of the whole process, ranging from identifying whether you in fact are required to complete one in the first place, to what allowable expenses you are entitled to claim for. Often it can be overwhelming and stressful for individuals in need of completing a tax return, as they may feel lost amongst the steps and procedures, especially when it comes to gathering all the correct and relevant information needed. Hopefully after reading this blog, we have provided you with enough information for you to understand the process, so it doesn’t seem so foreign.
Our team of determined staff are dedicated to helping individuals struggling through this process and aim to be of help in any way possible. Our deep understanding and experience within this process allows us to provide a stress-free process for all clients in need of our help. Whether that be employed individuals seeking to claim back a range of expenses they have across the tax year, or self-employed individuals required to file a tax return for their business to showcase their earning over the year.
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