Note: This article is not intended as financial advice, but rather general tips and tricks. Always seek professional financial advice for your individual situation.
As the end of the year approaches, we all have things to take care of. At the office, we need to find out whether we reached the year’s goals and targets and wrap up our projects for the year, and in our personal lives, we have to start preparing for tax time.
Tax is one of our biggest yearly expenses and we all want to make sure we don’t end up paying more than we should. To do this, you need to prepare your tax documents properly and make use of all possible deductions. It’s important to remember that in the UK, you have to pay income tax, capital gains tax, and inheritance tax at the end of each year.
So, it’s important to act now to get your taxes in order, and here are 8 top tips for preparing your taxes.
Decide Whether to do your own Taxes
If you haven’t gone through a major change in your life this year, such as starting your own business, claiming unemployment benefits, or getting married or divorced, then you’ll probably be able to prepare your taxes yourself, at least if you normally do your own taxes. Things should be pretty straightforward, as everything will be similar to what you did last year.
However, if you’ve had any major changes in your life this year, then it’s best to hire an accountant or tax professional to handle things for you. If you cannot afford to hire a professional then there are assistance and volunteer programs that you can look for to help you with the paperwork.
Organize Your Tax Papers and Financial Records
It’s important to keep all your tax-related documents and financial records well-organised. Of course, the easiest way to do this is keep everything up to date and in good order throughout the year. However, if you haven’t done this, and you’re faced with a mess of documents, the first thing you’ll need to do is get everything organised.
If you’re not sure where to start, take a look at your tax return from last year. This will help you to know what documents you need to prepare and what financial information you need. This will also give some of the information you’ll need for this year’s tax return, such as previous income.
Open an Online Tax Account
You can open an online tax account with HMRC – this is a quick and easy way to check your records and manage your official details. Through the online service you can fill in and complete your tax return, claim a tax refund and look at your tax return from last year, and details of your income tax paid over the last five years. The service is easy to use and is also available in Welsh. Other handy info you can access through the site includes your employment income over the previous five years and your State Pension.
Do Your Research
Before you submit your tax return, it’s important to be across all the relevant rules and regulations. This means doing your research and finding out what rules have changed since last year to make sure you comply with all tax laws without overpaying. Again, consulting with
According to many professional chartered tax advisers like hodge bakshi, the main types of tax you need to pay in the UK are:
- Income tax, which ranges from 20% to 45% depending on your income band.
- Savings income, subject to Personal Savings Allowance (PSA) which is applicable to income on savings, typically bank and building society interest.
- Dividend income, subject to a Dividend Tax Allowance (DTA) of £2000.
Gather all Your Deductions
Everyone wants to avoid overpaying their taxes, and this means making sure you claim all of the deductions you are entitled to. In the UK, you can claim some types of expenses related to your work – these are known as tax-deductible expenses.
However, it’s important to understand what type of expenses are legally deductible so that you don’t get on the wrong side of HMRC! Typically, the kind of expenses you can claim are work-related things you paid for and were not reimbursed, as well as cases where you were reimbursed by your employer but paid tax on that reimbursement. In this case, you’ll get tax relief – where you are not charged for the tax on the item – but not repaid for the whole cost of the item.
The best idea is to sit with a tax consultant and discover which expenses you are entitled to and other schemes you can access. This will ensure you comply with your tax obligations while paying the least amount of tax possible.
Protect Yourself from Scammers
Finally, as you prepare your taxes this year, be vigilant against scammers. Unfortunately, it’s becoming increasingly common for scammers to pose as HMRC this time of year, and you may start getting emails, text messages, and calls from people or entities that claim to be the HMRC. Remember, that HMRC won’t usually call you on the phone they will send you an official letter instead.
Never give out your personal information to anyone and don’t hire dubious individuals promising to get you a special deal on your tax returns. Only consult with to certified tax professionals.
