Completing personal tax returns Print E-mail

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Personal tax returns can be completed online or in paper form and can be submitted from 6 April each year. The deadline for completion of online personal tax returns in UK is 31 January following the end of the tax year ending 5 April. For example, a personal tax return for the year ended 5 April 2012 is due on 31 January 2013.  Paper tax returns are due by 31 October so need to be posted at least two weeks before that date.

Completing a tax return requires the individual to answer a set of pre-determined questions.  Based on the answers, HMRC will calculate a tax liability. Declaring income is quite simple and will be based on actual income earned, but it is important to note that certain types of income (such as VAT receipts) should not be included with taxable income on the tax return. Claiming expenses can be more complicated as detailed rules exist about what is and is not allowable. 

HMRC run a dedicated website which is regularly updated and contains all the main rules regarding allowable and disallowable expenses.  All necessary forms can also be downloaded from the website.  From time to time HMRC will carry out random audits of tax returns, and usually additional support for amounts noted in the tax return may be required.  Typically, HRMC tend to request invoices for amounts over a certain minimum (say £50) or will ask on what basis a certain claim has been made, ie a pension payment deducted from taxable income. 

Tax agents can be used to complete tax returns. If returns are quite simple there is no need to hire an agent, but more complicated returns may benefit from the insight of an experienced agent.This is especially true in the case of sole traders, who must declare their business income and expenses on their personal tax returns. Sole traders are people who conduct a trade without registering a limited company at Companies House.

When it comes to claiming expenses, there are quite a few grey areas that can confuse both agents and tax payers alike. A good example is when company cars are used for business travel as opposed to the use of the trader's own private vehicle and claiming business mileage.  Unfortunately when it comes to tax rules, many are designed with a view to closing tax loopholes, so they can appear quite confusing to the untrained eye.  

The Badges of trade are used to identify circumstances where trade expenses may be claimed.  The full explanation of their use and purpose can be found on the HMRC website.

Usually, office expenses can be claimed. Where traders trade from home, there is allowance made for the reasonable claim of use of home office expenses too. However, if any business assets are used by the trader for personal use, the equivalent value is taxed as income on the annual P11D benefits declaration.



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