Do you need to file a tax return?

Many people believe if you stop being self employed and go back to employment there is no need to file a tax return. What is often overlooked is that the last bit of self employment, the bit between 6th April and starting work, still has to be reported on a tax return. So don't ignore that tax return just because you now think its all handled through PAYE.


Who needs to complete a tax return?

 

• self employed people (including members of a partnership)
• company directors (except not for profit organisations)
• ministers of religion (any faith)
• people who get rent or income from land and property in the UK (but if you are an employee and this income is less than £2,500 a year a tax return may not be necessary)
• people who have other untaxed income and the tax due on it cannot be collected though a PAYE tax code
• people with taxable foreign income, even if they are not normally resident in the UK (this includes non-resident landlords)
• employees and pensioners with more complex tax affairs - see below

 

Remember, if you have any income that is not taxed at source, like rents or freelance earnings, you may need to complete a tax return.

 

Employees and pensioners with complex tax affairs

 You need to fill in a tax return if you:

• have an annual income of £100,000 or more
• have annual income from savings or investments of £10,000 or more (before tax)
• claim against tax for expenses or professional subscriptions of £2,500 or more
• have untaxed income of £2,500 or more (although some pensioners may be able to pay the tax on this through their PAYE tax code)
• owe tax at the end of the year that cannot be collected through a change to your PAYE tax code for the following year

 

 

Those bits of paper are really important

It is sometimes difficult for me to persuade clients the importance of keeping copies of P60's, P45's and letters from their employers, especially about redundancy payments.


I have had a couple of recent cases that emphasis the problem:
The first is a story of a redundancy payment, P45 and a final bonus were not clear and missing information meant it was not clear what the figure on the P45 was made up of as the client had not retained payslips. The result was we didn’t get the tax return right. HMRC picked this up and launched an investigation where they found the client negligent in submitting an incorrect tax return.

My second is a client being chased for a late 2008 tax return. The client was annoyed that they should be asked to complete a return as they argued they were all PAYE. This is a common mistake as the client’s affairs were complex. There were two private pensions being received, state pension and change of job and they were well into the 40% tax bracket. The client was also missing many P60’s. Once we had obtained all the information they actually had a fairly substantial tax bill because the employer was using a BR tax code which would not collect any 40% tax.

So my advice is to keep all your payslips for a couple of years. Make sure you get and keep copies of P45’s ( them for you get if you leave a job) the P60 ( the form you get each April when you are in a job or are in receipt of a pension) the P11D ( the form you get each April to June) from your employer if you have a company car, medical insurance or other benefit from your employer.


These forms are important.