Online Calculators since 2009
One of the advantages about filing your tax return online is that, in theory, you are less likely to make a mistake because calculations are done automatically, and you get on-screen tips and help as you work your way through your tax return.
You must ensure that you are organised and if you don't set aside enough time to do the form, you could still run the risk of slipping up. Below are some of the most common errors and tips on how to avoid them.
People often forget what savings accounts and/or investments they have, which means they end up leaving out one or more sources of income e.g. the interest from a building society account that they haven't used for a while. So before you start doing your form, go through your files and paperwork to make sure you've not forgotten anything.
You will have to include the interest you receive on any loans to individuals or organisations, including those made via "peer-to-peer" lending websites. You must also include interest received from credit union and friendly society accounts. You don't have to declare interest from Isa’s as these are tax-free savings.
Another common error is including the gross amount of interest instead of the net amount after tax that is being asked for. For example, with box 1 on page TR3 of the main return, relating to taxed UK interest, you need to put in the net amount – the interest after tax was taken off. Some account statements will explicitly give this figure; others just show gross interest and tax taken off.
If you've received one or more PAYE coding notices recently and simply filed them away without much thought, which can happen more often than you think, now is the time to double check your tax code. Thousands of taxpayers may well be paying too much, or too little, tax as a result of having the wrong tax code.
Your tax code is typically three digits followed by an L, such as "799L", and it tells your employer how much to deduct from your pay packet.
Gift Aid is another tax efficient way of making gifts or donations to a charity. Relief is available on donations you make to UK registered charities. Relief is also available if you make donations to charities registered in other EU member states (for now!), Norway and Iceland.
Gift Aid also applies to gifts made to Community Amateur Sports Clubs (CASC). The relief only applies to gifts made to the CASC and not to any other payments such as membership subscriptions.
When you make a donation, you use money that has already been taxed. If, like most taxpayers in the UK, you are a 20% taxpayer, you will have made your donation out of income that has already suffered 20% tax. The charity will take your donation and then reclaim the 20% tax that you originally paid, from HMRC. If you are a 20% taxpayer, there is no further adjustment that needs to be made.
You earn £12.50 and £2.50 is deducted from this at the basic rate of 20%. This leaves you with £10. If you give this £10 to a charity using Gift Aid, the £2.50 tax you paid on it will be paid to the charity by HMRC, so the total received by the charity is £12.50.
If you pay tax at the rate of 40% or above, you can claim the difference, between the tax you paid and the 20% tax claimed by the charity, back from HMRC yourself.
Finally, don't forget to pay what you owe. As well as submitting your form, you must pay any outstanding tax by 31 January – this applies whether you filed a paper or an online return.