Have you got your tax return yet? Even if you recall seeing it land on your doormat a few months ago, there's a good chance you haven't yet got as far as actually opening it. But the time is fast approaching when it will pay you to take the nagging advice of the nagging Mrs Doyle in the television advertisements and, "Go on, go on". Find the package and get to grips with the dread task.
Few chores can be less appealing than filling in a tax return, especially if you suspect you owe the Inland Revenue money. But despite the reluctance most of us feel, completing a self-assessment tax return is generally far easier and quicker than most people imagine. If you get your tax return in by 30 September, the Inland Revenue will calculate how much tax you owe. This will save you the trouble of having to do the sums yourself, which you will be compelled to do by the end of next January. And as 30 September falls on a Sunday this year, tax returns will have to reach the Inland Revenue by Friday, 28 September to meet the deadline.
Taking action now is the simplest and cheapest option, says Clive Mackintosh, partner at the accountant PricewaterhouseCoopers. "Taxpayers do themselves no favours by putting it of. Leaving it until 31 January means taxpayers will have to do the calculations themselves, or pay an expert to do it for them."
The end of January is the final deadline for tax returns for the 2000/2001 tax year. At this point, any tax you owe must be paid, otherwise interest will be charged on amounts outstanding and a £100 fine may be imposed.
Jonathan Bruce, senior tax manager at accountant Ernst & Young says completing your return in time for the Revenue to do the calculations takes away the main difficulty of the task. But the downside is that even tax officials make mistakes. "The Revenue frequently do it incorrectly," Mr Bruce says. "You can't afford to expect them to get it right all the time."
He suggests that taxpayers who do not want to do the calculations themselves should at least have a stab at it. That way they will have a chance of telling if the Revenue is charging them far too much. If you do owe tax and are employed, then as long as your return is in by the end of September – and the tax underpayment is less than £2,000 – the amount you owe can be collected through your tax code in the next tax year. But if your return arrives at the tax office any later than this, you will have to pay the whole amount owed by the end of January. "Where this applies, you will have slightly more tax deducted from your salary during 2002/2003," Mike Warburton, senior tax partner at Grant Thornton, says. "But this way, you can spread payment over 12 equal instalments, if you're paid monthly, between 6 April 2002 and 5 April 2003, which allows you to keep hold of your capital for longer. You can even invest the funds to actually offset the tax you have to pay later."
Even if you are one of the many who do not manage to get their return in by the end of September, you must by law have asked the Revenue for a tax return by October if your tax affairs warrant it. The Revenue will probably want you to fill in a tax return if you are a higher-rate taxpayer, self-employed or have income from sources other than PAYE. This could include investment or rental income.
Many do not realise it is your responsibility to request a form if you haven't received one. "Part of the legislation says you have an obligation to notify if you are liable to pay more tax," says Mr Bruce. Many self-employed taxpayers do not claim all the expenses they can write off. Any costs wholly and exclusively incurred in the running of their business can be offset against tax. If you are self-employed and work from home, this includes a percentage of all your household expenses, depending on the proportion of your home you use for your business, and the time it is in business use.
Particularly for self-employed taxpayers, it is essential to keep receipts for all business expenses you write off against your tax. Paula Higgleton, senior manager at PricewaterhouseCoopers in London, says: "The Revenue reserve the right to launch an inquiry into your tax return, and if you can't prove allowable expenses, the chances are the Revenue won't let you claim them." You should make sure you have all the supplementary pages you need, as detailed on page two of the return. If they are not with the return, order them from the Inland Revenue's orderline.
Employees need to have their P60 to hand, the summary of earnings. If they receive any benefits in kind from their job they need a P11D statement of benefits. The self-employed need details of income and expenditure. You also need annual interest summaries from banks or other savings institutions and details of pension contributions made through the year, whether net or gross. Collect information on any dividends received during the year, whether they are from your own company or any quoted company.
If you made a photocopy of last year's tax return, using this as reference will make completing this year's form much easier. Remember to take a copy of this year's completed return before you put it in the envelope. If there are any sources of income you declared last year but you no longer have, use the white spaces provided on the form marked "additional information" to explain this to the tax officials. This will lessen the chances of an investigation being launched into your return.
Useful telephone numbers: Inland Revenue orderline, 0845 9000404; Ernst & Young, 020-7951 2000; PricewaterhouseCoopers, 020-7583 5000; Grant Thornton, 020-7383 5100Reuse content