You are welcome to ask me any questions about what information I need for your tax return, or, if you are undecided, how you can set this out for me.
By April 2024, taxpayers who are in business or who are landlords, and who have gross income over £10,000, will need to be keeping digital records, with quarterly updates going to HMRC. Taxpayers can either use accounting software or keep spreadsheet records. Crucially, each transaction – each job invoiced, each expense paid – needs its own separate entry which is added up within the software/spreadsheet. I am suggesting that clients stay with or move to using spreadsheets and get into practice ready for this. This is with a view to most clients being able to submit their own ‘quarterly updates’, with the final return prepared by me.
HMRC is also pushing taxpayers towards a 31 March or 5 April year end by 2024. I am encouraging clients who use a different accounting date to consider switching in the next (2022) tax return.
Here is a reminder of some of the key items of information I shall need for the 2021 tax return, covering the tax year 6 April 2020 to 5 April 2021, which is due for submission at the latest 31 January 2021.
ALL INCOME OF ANY SORT:
If you think some income may be exempt from tax, or are unsure whether this needs to be shown on your return, let me know about it so I can check. This year for many this includes SEISS grant income from SEISS 4 and 5. Returns are prepared on the basis of full disclosure of all relevant worldwide income and gains. Any taxpayer who decides that on reflection they was not eligible to claim part or all of an amount received via SEISS is able to repay this to HMRC via the tax return.
EMPLOYEES OR ANYONE DOING WORK WHICH IS PAYROLLED:
Form P60 (payment summary). By law, employers must provide these to employees by 31 May. Form P11D if you receive any benefits such as a company car or medical insurance. If you have changed job or left employment, form P45. If you have not received your form(s) P60 by 31 May, please ask for a copy straight away. Many employers in the last year or two have moved to an online access where you need to log in to obtain your form. There are often problems obtaining copies close to the tax-return deadline, and I can’t usually finish a tax return where a P60 is outstanding, although it may be possible to take the relevant details from the final payslip of the tax year (week 52 or month 12).
SELF EMPLOYED INCOME:
Totals of all earned income, including cash receipts. You have the choice to record income and expenses either when they were due (invoiced) or on a cash basis (when actually paid). Include the gross income, please, before any tax or national insurance was taken off.
All expenses related to your work: I have a list of typical expenses, but for each transaction, please consider whether this is for your work and whether 100% for work, or not entirely.
Agents’ commission: I need to know the original gross fee before any commission, and the amount of commission taken.
When travelling away from home, reasonable subsistence expenses can be claimed for meals out or at your hotel (or shopped for if self-catering). Food can be claimed for when travelling without an overnight stay under certain, limited circumstances.
BANK AND BUILDING SOCIETY INTEREST:
This needs to be shown on your return unless it is from an ISA.
Please order or download a certificate from your bank for every account you have, even if interest received was little or nothing during the year. Banks do not necessarily send these automatically.
If your household receives child benefit, even if it is not paid to you directly, I need to know about it for your tax return. I shall also need to know various information about the taxable income your partner/spouse receives, even if I don’t prepare their tax return. For families where at least one parent has taxable income of £50,000+, there will be extra tax, and for £60,000+, this extra tax will equal the full child benefit received. This is done by taxing child benefit on the higher earner where restriction applies. Each year you should receive a statement showing the child benefit due for the coming tax year. Please keep this as it forms part of your tax records. If you do not already have a statement please ring 0845 302 1444 and ask for confirmation of the amount for the year ended 5 April 2019.
If you did work outside the UK which was taxed, please keep both the income and the expenses for each country separate from everything else, as separate accounts have to be drawn up. Include the gross income, please, before any tax or social security was taken off.
Anyone travelling to mainland Europe to work in other EU countries is likely to need a form A1 (previously E101) in order to avoid paying social security overseas as well as in the UK. Please let me know as soon as overseas work is booked even if all details are not finalised, so an application can be made as early as possible. Class 2 NICs will be collected with your income tax rather than billed or debited separately.
If you had one or more form A1 recently, some of your Class 2 may still be collected by the NI office, who will post you an invoice. This needs to be paid separately: please let me know the amount you are paying. Unless we are sure all Class 2 is covered, I add this (around £150) into the tax return and we wait for HMRC to adjust if necessary once the return in submitted.
If you receive pension income, you should be sent a separate P60 for every pension you have, except for the State Pension, for which a letter is sent out each year detailing the amounts to be paid to you in the coming tax year. I need to see this and any forms P60 when I prepare your return. In recent years there have been issues with discrepancies between the state pension amounts received into clients’ bank accounts and the figures HMRC receives from DWP and therefore expects in the return. I am suggesting that any clients who do not have a pension statement for State Pension make a call to the Pensions Service 0800 731 0469 to check what figure DWP are passing to HMRC for their return.
MOST COMMON MISSING INFORMATION:
These are the items clients often find themselves chasing very close to 31 January – don’t be caught out!
- Forms P60
- Bank interest
- Payments into personal pensions
- Mortgage interest statements. If you are self employed based at home or have a property you rent out, we may claim part or all of the mortgage interest you pay. Please order a certificate from your mortgage provider showing the interest only paid in the year(s) for which we are preparing accounts.
- Gift aid payment details. If you pay tax at 40% or more, these will save you some tax when included in your return. If your tax is low, gift aid payments must still be included. If you have no tax bill based on your income, HMRC will charge you tax on any gift aid payments you made.
And these are things clients sometimes forget to let me know about:
- Student loans need to be shown on the tax return.
- Being director of a company (even if no money was received from that company)
- Items sold recently: work equipment/shares/other investments.
- Gift Aid donations to charity: many people make regular donations by standing order but forget to include these, or don’t realise that they need to appear in the tax return. Any one-off donations for which you ticked a box saying you are a taxpayer will also need to be included. If you pay little or no tax, and make Gift Aid payments, there may be some extra tax for you to pay when your tax return is submitted, unless you let the charity know you do not pay sufficient tax for them to take advantage of the Gift Aid element.
- Please also let me know about any changes in family circumstances.
CLASS 2 National Insurance Contributions:
If you have done any mainland EU work with a form A1 in place, you are likely to be billed separately for Class 2 NICs (these would otherwise be dealt with in the tax return). Where this applies, and also where clients pay some Class 1 (employee) NICs, there may be a small reduction after the tax return is submitted when HMRC adjust the Class 2. Class 2 contributions can be paid voluntarily where income for the year is below the threshold. https://www.gov.uk/voluntary-national-insurance-contributions
If you want to check your ‘NI record’, which affects your entitlement to State Pension, you can do that here https://www.gov.uk/check-national-insurance-record