How to file a self-assessment tax return

Tax does not have a reputation for generating excitement, but more than half a million taxpayers left it until deadline day last year to file their tax returns. About 20,000 left it until the final hour.

With two weeks until the submission window for online self-assessment returns closes, and with 4.5m of the 11m or so anticipated returns outstanding, according to HM Revenue & Customs, large numbers are again likely to leave it until January 31 to settle their tax liabilities for 2013-14.

However, there are many practical reasons not to leave self-assessment - and payment of any outstanding tax for the year - until the eleventh hour.

Individuals with straightforward tax affairs, who pay income tax directly through Pay As You Earn (PAYE), will not need to self-assess.

Taxpayers with more complex arrangements, including the self-employed and those with taxable gains to declare - such as property landlords - are obliged to submit a self-assessment return.

"Even if your income is paid under PAYE, it is still up to you to notify the Revenue of any other income streams, or one-off capital gains, that you may have," said Patricia Mock, a tax director at Deloitte.

Those who missed the October 31 deadline for filing their paper return must now submit their details online to avoid penalties.

As of last year, taxpayers with an annual income of more than £50,000 who receive child benefit must complete a return for some of the benefit to be repaid. For couples where one income exceeds £60,000, the full child benefit is clawed back via self-assessment.

For those who filed self-assessment returns for 2012-13, the deadline to amend these is also January 31.

First, taxpayers need to be registered for HMRC online services. According to HMRC, seven working days should be allowed to receive an activation code by post. For those who yet to register, there is little time to delay.

To activate their online account, taxpayers will need their 10-digit "unique taxpayer reference" number. For those already signed up for self-assessment, this can be found on relevant HMRC correspondence.

While the formal deadline for signing up for self-assessment for 2013-14 was October 5, there is no penalty for late registration. "All is not lost, so long as the return is submitted and tax is paid on time, but they need to get a move on and ring HMRC now," said Anita Monteith, technical director at accountancy body ICAEW.

"The most important thing is to have all of your paperwork in order in the first place," said Ms Monteith.

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The documents relating to employment income are the P60 statement - a summary of income and tax deductions issued to taxpayers at the end of a tax year - and the P11D, which details expenses and benefits paid to employees.

Details of any other personal income and investments should also be to hand, as well as the taxpayer's national insurance (NI) number and employer reference, if relevant.

The return aims to paint a picture of an individual's taxable income and gains for the 2013-14 tax year.

As well as income from an employer or self-employment, details of UK and foreign income must also be declared. This includes company dividends, bank account interest and income from a trust or settlement, plus any taxable benefits - from employers or the government.

Any capital gains from the disposal of assets, including shares, land and property, must also be disclosed, as well as rental income. The sale of a main residence is exempt from CGT under principal private residence relief.

Supplementary pages must be completed for each relevant income stream, each of which has its own set of guidance notes to assist completion.

It is important to include details of savings and investments that qualify for tax reliefs, including payments into pension schemes other than your employer's.

Investments into enterprise investment schemes and venture capital trusts - both government-approved schemes to encourage investment in small companies - qualify for income tax relief at a rate of 30 per cent, subject to the relevant conditions being met.

Gifts to charity should also be detailed. Higher rate relief on Gift Aid donations allows those who pay income tax at 40 per cent or above to claim the difference between the higher and basic rate on their gifts. A donation of £1,000 - worth £1,250 to the charity with Gift Aid - qualifies for a tax rebate of £250.

Gifts made in 2014-15 can be carried back to 2013-14 if they are made before the tax return is submitted. "It may provide an incentive to those who are going to give money this calendar year to give this month, before filing their [2013-14] return," said Ms Mock.

According to HMRC, almost 7 per cent of online and paper were submitted after their respective deadlines for the 2012-13 tax year.

An automatic penalty of £100 is given to taxpayers who miss the January 31 deadline, with further penalties of £10 a day applied after three months. Late payment also incurs a penalty plus interest. <

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Ms Monteith said that a potential pitfall for those submitting after January 31 would be to file a return by post. Given that the deadline for paper returns was October 31, these taxpayers would incur higher penalties than if they filed online.

Even if there is no tax liability or outstanding tax has already been paid, recipients of a notice to submit a self-assessment return must still do so.

Ms Mock said that taxpayers can notify HMRC if their circumstances have changed to take them out of the self-assessment system. "HMRC is in fact quite keen to take people out of self-assessment . . . when you file a return without any income, it should prompt a letter."

HMRC's online portal allows taxpayers to save partially completed returns, to allow it to be done in stages over several days.

Simple mistakes, such as omitting to submit a completed return, can lead to the automatic penalty, said Ms Monteith. "My biggest single piece of advice is to print off a copy of your completed return and tax calculation."

Official help and advice on completing a self-assessment is available online at gov.uk/self-assessment-tax-returns, and taxpayers can also register for a new online chat service to answer their questions.

Taxpayers can also call the HMRC helpline on 0300 200 3310. This is open 8am to 8pm on weekdays and 8am to 4pm on Saturdays.

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