Personal Tax returns need to be with the Revenue by 31 January at the latest. If you want the Inland Revenue to calculate your tax and send you a statement of the amount due the return needs to be filed by the 30 September.
A fixed penalty of £100 applies if a return is not with the Revenue by 31 January following the end of the tax year. These penalties can rise to £1600 if a return is up to a year late. It pays to file on time.
Once the return is completed, the tax liability or refund needs to be computed.
An employee or director with an outstanding tax liability below £2000 will generally have it collected via the PAYE code, unless he or she has elected to pay it in a lump sum by 31 January.
For the self-employed, 50% of their estimated liability should have been paid on 31 January within the tax year and a further payment of 50% on 31 July immediately following the tax year. Any remaining balance will be due by 31 January after the tax year, together with 50% of the estimated liability for the current tax year.
In either case, any tax due on your capital gains for the year will also be payable by 31 January.
Interest will be due if a tax payment is late and an additional surcharge will apply if the payment is more than six months late.
Sorting out as much as you can as soon as the tax year ends makes the return process much easier and will ensure everything is ready to be submitted well in advance of the 30 September deadline – so the Revenue do the tax calculation.
Married couples and those in civil partnerships should arrange their affairs to ensure that their personal allowances and the basic rate band of tax are used to the fullest possible extent. This may require transferring investment income from one partner to the other but remember that this can only be achieved where the beneficial interest in the underlying capital is also transferred.
Are your children making the most of their personal allowances? If they have income from a bank or building society account and the total income for the year is less than their personal allowance, then the child (or the parent on their behalf) can register to receive the income gross without deduction of tax. However, if the income is derived from money that the parent has put aside on the child’s behalf then the income will be taxed as the parent’s income (at the parent’s marginal tax rate) while the child is unmarried and under 18 years of age.
Taxpayers aged 65 or over may be entitled to a higher personal allowance, the ‘age allowance’. This allowance is restricted if the individual’s income exceeds £24,000 for 2011/12. For every £2 of income in excess of this amount the additional allowance is reduced by £1 until it reaches the level of the basic personal allowance. A higher married couple’s allowance may also be available where at least one of the spouses was born before 6th April 1935. Consider arranging your affairs to ensure that at least one spouse will have a total income not exceeding £24,000 for 2011/12.
Capital gains tax can be expensive as gains are taxed at 18% for basic rate taxpayers and 28% for higher rate taxpayers. However, exposure to this tax can be reduced by the timing of the disposal of assets and through careful planning.
The first £10,600 of gains are free from capital gains tax for 2011/12 which represents £2968 of tax at 28%. It is therefore a good idea to make use of the annual exemption if you can, particularly since it will be lost otherwise. Any decisions will depend on personal circumstances and on the status of the asset.
Spouses have separate annual exemptions so you can make a gain of £21,200 on joint property without generating a liability.
Similar planning can be implemented for inheritance tax purposes. You can give away up to £3,000 per year without an inheritance tax liability arising and, since unused allowances can be carried forward for one year, you may be able to give away as much as £6,000 this year depending on the gifts you made last year.
In addition, you can give away a further £250 per individual without becoming liable to inheritance tax. Similar allowances apply to wedding gifts depending on your relationship to the happy couple.
Review investments to make sure that you have made appropriate payments where necessary. In the tax year 2011-12 you can put up to £10,680 into ISAs.
Subject to this overall limit, you can put up to £5,340 in a cash ISA and the remainder of the £10,680 into a stocks and shares ISA with either the same or another provider.
Any profits realised will be tax-free. Make a list of all investments and, if necessary, contact an independent financial advisor to ensure that you have made the most of them in time for the end of the tax year.
Review pension contributions. You may want to consider making Additional Voluntary Contributions (AVCs) to your employer scheme or Free-standing Additional Voluntary Contributions (FSAVCs) to your own contract. If you do not pay these contributions by the end of the tax year, you will not get a tax deduction for them against your income of the current year.
Review any claims for Working tax credit and child tax credit . Claims for credit will need to be made within 3 months of the start of the tax year. Taxpayers with earnings of up to £41,300 per year can benefit from these credits. Even if your income exceeds £41,300 if you have a child with a disability or a large family and you spend a lot on childcare, you may still qualify. Be sure that you check out your eligibility.