|
1. Register your business with the HMRC
If you have recently started your business you have three months to inform the revenue by completing form CWF1. Failure to do so can result in a £100 fine.
2.Register with HMRC website to submit your tax return online
It can help to avoid processing errors, and to receive faster repayments. To submit your form online, you will need a User ID and password. These take a week to come through so, if you have not already done so, make sure you do this now.
3. Check the tax you pay
If you run a business, you will need to complete a tax return, however, your spouse or other family members on PAYE may not. They rely completely on HMRC getting it right – but does it?
A recent National Audit Office report highlights HMRC processing errors and that more than 1 million people paid the wrong amount of tax in 2006-07. Whilst some people paid too little, more than 500,000 people paid too much, on average £290 too much. Did you pay too much or too little?
4. Don't incur unnecessary fines
Last year 10% of returns were filed after the 31 January deadline, leaving the offenders open to fines of £100. HMRC is currently reviewing the fine and it may rise significantly in future years.
5. Don't incur unnecessary interest: plan your cash flow
The income tax due for 2006/07 is due on 31 January 2008. A payment on account of the 2007/08 liability will be payable on the same day. This is 50% of the previous tax year. In a business's first year this means that your tax bill could be 150% of the tax you owe. Make sure the cash is there to pay the bill.
Interest will start to run immediately on unpaid tax. In addition, there is a 5% surcharge on all tax still owed 28 days after the deadline (i.e. the end of February). This equates to an annual interest rate of 65%. This surcharge is repeated in July.
6. Check what tax relief you are entitled to
Don't believe everything you are told as there are lots of myths about what expenses can be claimed for tax purposes.
Tax relief is due only for expenses which are incurred wholly and exclusively for the purposes of the business, although in practice HMRC does allow proportionate claims to be made for assets like cars, which are used partly for business and partly for private purposes.
7. Record all income and expenses
You have a legal duty to record income and expenses relating to your business.
HMRC has a useful booklet (SABK4) which explains what you need to keep and what you need to do.
8. Put money aside to pay your tax bill
Your tax bill always comes as a nasty surprise, so plan for it in advance. The sooner you prepare your tax return, the sooner you know how much is due and plan for its payments. As a general rule, you should put aside 20-25% of your profits to ensure you can cover your tax bill.
9. Don't forget to sign your tax return
A tax return that is not signed cannot be accepted. If you submit your tax return online, the combination of your ID and password is sufficient so you do not need a signature.
10. Submit your tax returns
The deadline is midnight 31 January 2007 if filing online. Whilst strictly it is the same for paper filing, in practice you will avoid the penalty if you hand deliver it on 1 February 2007. HMRC will not give a receipt if it is filed by hand, so send it by recorded delivery to ensure that you can prove filing.
About the author
TaxCalc.com is the UK's leading provider of tax software solutions whose aim is to make the filing of personal tax returns as simple and quick as possible. The TaxCalc.com programs take you step by step through your tax returns allowing you to complete your return accurately, quickly and easily. In addition to this TaxCalc.com guarantees safe and secure online filing (a very important issue at the moment) and provides free UK-based telephone expert support.
|
