How to avoid an attack of the tax jitters

Click to follow
The Independent Online
The 31 October deadline for filing annual tax returns for 1994- 95 coincides with a fresh round of advertising by the Inland Revenue, reminding taxpayers of the switch to self-assessment in 1997.

The timing of the campaign is unfortunate, especially as some tax accountants and solicitors are using the publicity, the deadline and risk of penalties under self-assessment to stampede nervous taxpayers into getting professional advice right away.

In fact, self-assessment is still some way off. It only applies to the tax year 1996-97, which is still six months away, and not to the current tax year 1995-96, for which returns will be made in 12 months. But the 31 October deadline is real. The taxman can levy interest at 7 per cent on returns not submitted in time.

More than nine million people have to fill in an annual tax return, including anyone who has a second job, or earns enough to pay the top rate of tax, as well as the self-employed. The returns must also be as complete as possible. Putting "to be be advised later" in place of a correct figure means the return is not complete and interest and penalties may be imposed even if the form is posted before the deadline.

If you genuinely do not know the figure, put in an estimate. It may save you.

Benefits in kind must be included, even though they may also have been reported direct to the Revenue by your employer. But payments to reimburse expenses you incurred as part of your job should be identified as such to make sure they are not automatically assessed for tax.

Income from bank and building society accounts and from stocks and shares must be declared, even if it has been taxed at source, because it will have to be subjected to a further 15 per cent tax charge if you are a higher rate taxpayer. But there is no need to include tax-exempt savings scheme accounts or personal equity plans.

Capital gains need not be calculated or reported if the total gain was pounds 5,800 or less and/or the value of the assets you sold was pounds 11,600 or less.

For those who are self-employed or in partnerships, earnings and expenses should be recorded but detailed accounts are not required if the annual turnover was less than pounds 15,000. Likewise, landlords whose rental income before expenses was less than pounds 15,000 should record the figures, but detailed accounts are not needed.

Depreciation is not an allowable expense, but if you bought equipment to help in earning money you can claim a capital allowance equal to 25 per cent of the initial value in the year you buy it and 25 per cent of the remaining capital value in subsequent years.

Good luck and make a New Year resolution to keep more detailed records for the next financial year, 1996-97.

Looking for credit card or current account deals? Search here

Comments