Avoiding self-assessment pitfalls

As of 21st January 2022, almost half the 12.2 million taxpayers who are due to file a self-assessment return for 2020-21 have yet to do so.

HM Revenue & Customs has given workers an extra month to complete their returns, but you should still try to file by the end of January if possible.

A huge incentive to do so is that interest on tax paid late is charged at 2.75%, even though no late filing penalties will apply until 28th February. Changing deadlines are not the only thing to be worried about. Our tax system is full of peculiar rules and quirks which could catch you out. Here are some to be wary of this tax season.

• Don’t forget to report property gains. If you made a taxable gain on residential property, then it should have been reported to HMRC online within 30 days of completion
• Avoid falling into a trust tax trap. A similar problem can arise if you are the beneficiary of a trust. Depending on the type of trust you may have to declare the income or gains on your self-assessment return.
• Higher earners should claim their full pension relief allowance. Pension contributions to a self-invested personal pension, known as a Sipp, are made with basic-rate income tax relief given at source, but you will miss out on any higher-rate relief if you do not complete the box to claim this on your return.
• Double check your pension contributions. On the subject of pensions, more taxpayers, including many doctors, are being trapped by the annual allowance tax charge. The allowance is £40,000 a year or equal to your salary, whatever is lowest.
• Pay tax due on your company shares. More people are benefiting from company share incentive schemes. Unless the scheme is a qualifying tax favoured scheme there is a charge to income tax when you become beneficially entitled to the shares, based on the market value of those shares.

If you would like assistance with your tax return, please contact us here.

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Sources: Techlink