FOOL'S EYE VIEW
Beat Tax Deadline & Save Money

By James Carlisle
September 4, 2002

Tax Dealine Looming

You can tell by the strange adverts on the telly that a tax deadline is approaching. Once upon a time it was Hector the helpful Tax Man, then we had Mrs Doyle – go on, go on, go on, go on, go on etc... This year we've got a strange scientist abseiling down the side of a building.

The truth is, though, that if you want to avoid yourself the greatest amount of hassle, then this first tax deadline, the 30th September in fact, is the key. That's because, if you send in your 2001/2 tax return by this date, then the Inland Revenue promise to calculate your tax for you (arguably the hardest bit) and tell you what you owe before the time comes to pay it (31 January).

The Revenue will still calculate your tax (if you don't) if you miss this deadline, but they may not tell you how much to pay before the deadline for paying it (31 January). So you end having to guess on an amount to send them and then paying interest, and perhaps surcharges, to them if it's not enough. If you fail to send in your tax return by 31 January, then there's an automatic fine of £100. Another £100 is added to the bill if the return isn't sent in by 31 July. Beyond that, the Inland Revenue has apparently been talking about £60 per day fines for persistent late-payers.

Another advantage of getting your tax return in by 30th September is that if you owe less than £2,000 of tax, then it might be possible to have it collected though next year's PAYE (ie the tax that's automatically deducted by your employer).

So, if you want a minimum of fuss, then it's best to get the blasted thing out of the way now!

Who needs to do one?

If you need to do a tax return, then most likely you'll know about it because you'll have been sent one by the Inland Revenue. It's possible, though, that your circumstances have changed and the Tax Man hasn't cottoned on yet. Just because you haven't been sent one doesn't mean you don't need to fill one out – it's for you to decide. Broadly speaking, the people that need to fill out the tax return are:

• People that have to pay higher rate tax
• The self-employed and people in business partnerships
• Company directors, trustees and the like
• Anyone with 'more complex tax affairs', including people who get income from property, or trusts, in the UK

What you'll need

The key to filling in the tax return is to have all the right bits and pieces to hand. It is, after all, principally a box filling exercise. So, with any luck, you'll have been carefully filing away your tax-related documents throughout the year. If you haven't, then most of the work involved in this year's tax return will be finding the blasted things. Bad luck. Next year, you'll know better.

The tax return consists of 'the main bit', which everyone (that needs to do a tax return) has to fill in. There are then a series of 'supplementary pages' that delve a little deeper into specific situations. You have to fill in whichever of these are relevant.

Most people will get away with just completing the Employment pages, the Self-Employment pages or, at a pinch, the Partnership pages. The others are Share Schemes, Land & Property, Foreign, Trusts, Capital Gains Tax and Non-Residence and they go through varying degrees of obscure, confusing and frustrating. You'll need different records depending on which bits you have to fill in, but that's okay since you'll have different records depending on what you need to fill in. Just remember to keep them safe!

If you're really on top of your game, then you'll also make sure you have a photocopy of last year's tax return. Most likely, you've been doing similar things this year and your tax return is most likely similar too.

Of course, if you really want to make things easy for yourself (or easier anyway), then you'll want to equip yourself with a copy of the Motley Fool's Tax Return Workbook.

Filling in the return

Once you've got everything together then, for the majority of people, the rest of it should be fairly straightforward. The first thing to decide is whether you want to do it on paper or online. The Inland Revenue's online service had a few problems a few months back, when apparently people could see other people's returns, but this has now been solved.

The online approach has the advantage of automatically working out your tax. It should also make things more efficient at the Inland Revenue's end and therefore quicker for you. To do the return online, you need to start at the Inland Revenue's Internet Service.

If you're doing the return the old-fashioned way, then it's a little like doing an exam: use blue or black ink, write clearly and only in the spaces provided. Numbers should be used for all amounts (negative numbers in brackets). Income and gains should be rounded down to the nearest pound, while tax credits and deductions should be rounded up to the nearest pound.

Help!

The Motley Fool has recently published their own Tax Return Workbook. It's full of useful hints on how to fill in your tax return, as well as listing the top 10 tax saving tips. The book normally retails for £12.99, but we are offering it at a 20% discount. We've also bundled the book with popular personal finance software product Quicken, and are offering a massive 40% off the combinbed retail prices. Stocks are limited so order now to avoid disappointment.

Whatever you do, get to it -- the clock is ticking!

More: Tax Return Workbook ¦ Inland Revenue Self-Assessment website ¦ Taxes discussion board