Photo by Mikhail Nilov
Running your own company and being your boss is an excellent path. However, one task you may have to handle is submitting a tax return. It can be intimidating and complex to file taxes, so before you begin, familiarize yourself with the important facts about tax filing.
In this blog, Experlu shares seven top tips to assist you in filing your tax return.
7 Tips to file taxes for the first time
1. Get your paperwork together
Gather all the necessary paperwork and data before you begin so you can finish the self-assessment form. That involves your P60 form (if you’re employed), relevant documents and bills, payments, bank statements, tenancy agreements, student loan statements, and information regarding any benefits you’ve received.
It’s also an excellent plan to review your current and savings account statements for the pertinent financial year, listing all the different places your revenue is coming from. That way, you’ll better understand which income sources you must declare and which taxes may be due.
2. Know which taxes to pay
You must pay various taxes depending on the amount of revenue you make. These include income tax from employment and dividend earnings, as well as national insurance and capital gains tax. As such, you must record every transaction to determine how much you have earned.
3. Don’t forget allowances and expenses
You can lower your HMRC bill by claiming different reliefs and allowances when you submit your return. These can include everything from business travel to stationary costs for the office.
You can also claim tax credits on the expenses of running your company’s premises, such as energy. If your workplace is at home, you can also claim a portion of your expenses for the time you are working.
Understanding the regulations regarding what you can and cannot claim can take time and effort. If there is any uncertainty, HMRC’s website has additional details.
4. Avoid penalties
The earlier you fill out your tax return, the less likely you are to face any penalties. HMRC may impose fees on you for:
- Not paying your entire tax bill by 31st January at midnight
- Not registering for the Self Assessment by 5th October
- Failing to notify HMRC about any modifications to your circumstances that could affect how much tax you owe
- Errors in your paperwork
Most of the above charges depend on your specific situation. However, if you fail to file your tax return and pay the invoice on time, there is a right-away penalty of £100. There are additional costs and interest if your tax return is filed after three months.
5. More time to plan your finances
Hire accountants for filing the tax return early has many benefits. By doing it in advance, you’ll understand how much taxes you owe before the January deadline and have additional time to plan your finances accordingly. On the other hand, you may incur late payment penalties if you file after Christmas and discover that you cannot pay your taxes on schedule.
6. Take your time, but don’t be late
Try not to leave every detail at the last minute. There is a £100 upfront penalty if you file online after the deadline. After three months, this rises to £10 per day (for up to 90 days). Further penalties will apply if your return is more than six or 12 months late.
The tax office will additionally fine you if you pay late. If you pay your tax bill more than a few months after it’s due, you may incur additional penalties in addition to daily interest charges from the date the payment was due.
7. Seek help if you need it
If you need more time to pay by the due date of 31st January, contact HMRC as soon as possible.
You can establish a Time to Pay arrangement allowing you to pay periodic payments over an agreed period. You’ll contribute interest on anything owed after the due date but at a lower rate than the late payment rate.
Final thoughts
Filing taxes for the initial time may seem time-consuming, but with the right income tax calculator and advice, you can confidently handle the process. You’ll be prepared to file your taxes quickly and correctly by paying attention to these seven points, which will pave the way for future financial success.
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