We are really lucky that Richard Grayson from Nicholsons has kindly given us hints and tips on how to fill out your tax return.
Checkout what you need to be doing below so you don’t get caught with any fines.
How to fill in your Tax Return
If you have income from renting out a residential or commercial property, you will need to complete and submit a Tax Return to H M Revenue and Customs (HMRC) each tax year. There are 3 options when it comes to completing your annual Tax Return.
Complete the Tax Return yourself and submit the paper version.
If you choose this option, you will need to complete the Tax Return by hand and the important thing to note is that the filing deadline will be 31 October, following the end of the tax year. If you submit a paper Tax Return after this date, there will be an automatic late filing penalty, even if you do not owe any tax.
Complete the Tax Return yourself online
This option is different from the one above, the major differences being:
The filing deadline is extended by 3 months to 31 January.
You will need to enter your personal details through the HMRC website to register with HMRC for online filing.
There are various prompts that help you complete the online Tax Return (and stop you making ‘silly’ mistakes).
Ask an Accountant or property tax expert to help when preparing and submitting your Tax Return
Most accountants use proprietary software, rather than the HMRC website to submit Tax Returns. This allows the Return to be filed by the later deadline of 31 January without incurring a penalty.
In addition, the accountant may be able to make suggestions as to how you can minimise your tax bill through the information gained in preparing your Return. This should help to defray the accountants charges for filing your Return, and you may even end up in ‘profit’!
Having established which option you prefer, you will need to make sure that the entries you make on the Return are backed up by solid facts and figures. HMRC will rarely ask to see your underlying records, but if they do, you must produce them to support your declaration of income and expenditure.
This means that, as far as your property income calculation is concerned, you keep a record of all rents received and all expenses incurred, including loan interest. These should be separated into tax years. In addition, if you have income from employment and/or bank and building society interest, this all needs declaring so that your overall level of taxable income, and therefore your highest tax rate, can be calculated.
Once your Tax Return is completed and submitted, all your records must then be kept for 6 years in case HMRC request sight of them. If they are over 6 years old, it is safe to assume they can be destroyed.