Paying your business tax

Tax is a tricky part of any business whether you are a sole trader or large corporation, with many pitfalls to be avoided. Ruth’s tax articles are setting tax straight to help you understand and stay on top of the process!

As my day job involves helping struggling businesses back from the brink, I get to deal with many stressful situations but none like the due payment of personal tax! What I aim to do in this blog is given you a simple but effective 5 step guide to completing your tax return.

I will start by giving you the best advice I can! Get yourself a good Accountant who completes all of the paperwork and provides advice on your personal tax within the annual fee! I spend an hour a year with my Accountant and hand over all of the paperwork for my tax return and he deals with everything from there. No wonder I sleep easy at night.

If you can't afford an Accountant I have detailed below as step by step simple process into how to fill in your tax return.

Qualifying People

Let's start with who actually needs to complete a tax return as if you don't need to why bother!

  • All Directors of UK Trading Companies

  • All Self Employed People

  • All Higher Rate Taxpayers with Investment Income

  • Employees Earning £100,000 per Annum or More

  • Anyone in Receipt of an Untaxed Rental Income or Investment Income

  • Anyone in Receipt of Chargeable Capital Gains

  • All Trading Partnerships

Tax Periods

Unlike company financial Tax Years which are changeable, the personal Tax Year is static. 2012 / 2013 Tax Year runs from 6 April 2012 to 5 April 2013.

All taxable income for this period needs to be declared in your personal tax return.

Bank Reconciliation - The Simple Way

The easiest way to get all of your figures together is to carry out a review of your financial activities by going through your bank statements and highlighting your income for the year. Begin by categorising your income into various headings such as salary, pensions, bank interest, dividends etc.

If you have income with documentary evidence such as payslips, deposit account statements or dividend counterfoils these should be provided to match up with your bank statements. You will have to insert details of any tax deducted at source on your tax return so make sure that you have all tax certificates wherever possible such as P60 forms or certificate of interest received.

As you are going through your bank statements ensure you are noting down any relevant expenses. There are certain allowable expenses to claim against the various categories of income, you will need to determine what they are.

If you are a Landlord, Rental income statements as well as expenses statements will need to be prepared.

If you own a business and are preparing your own returns, you are required by law to retain invoices for a period of 6 years.

Preparing your Tax Return

Once you have noted all of your income you need to summarise it and enter the figures in the relevant places on the return. If you are unsure what goes where have a look online as there is loads of information on www.hmrc.uk

The form will ask you to complete your personal details, income such as Bank Interest, Dividends and pensions.

The form also asks you for outgoings that you can claim for such as private pension payments and charitable donations. There is also a section to declare your student loan repayments.

Other income is shown by including supplementary pages for the following categories:

  • Employment

  • Ministers of Religion

  • Self-employment

  • Lloyds Underwriters

  • Partnership

  • UK Property

  • Foreign income

  • Residence

  • Trusts

  • Capital Gains

  • Additional Information

HM Revenue and Customs issue a guide to completing your tax return which is really useful if you don't know which boxes to fill in.

Time is Money!

I don't know many people who want to waste money so make sure you don't get fined for completing your tax return late! Work within the deadlines for 2012/13 to avoid unnecessary penalties.

  • Paper returns must be filed before 31 October 2013. If you file a paper return then HMRC will issue a tax calculation.

  • Online returns must be filed before 31 January 2014. If you file your return online then you will be able to view / print your tax calculation.

In summary most people who have straight forward affairs, tax returns are straightforward enough to complete yourself. If you affairs are not straight forward take my advice and get yourself an Accountant to help otherwise it's likely you will be paying tax on money you don't need too!

As a final note: if you're considering hiring an accountant, Towergate have put together a helpful infographic highlighting the benefits of all your different options.

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