Filing your self assessment tax returns

Paper tax returns covering income for the year ending 5 April 2014 had to be submitted to HM Revenue & Customs (HMRC) by 31 October 2014. Online tax returns must be received by HMRC on 31 January 2015.

Assessment of your liability to income tax and capital gains tax can be a confusing time for the self employed, and with automatic penalties for late filing, this is something every entrepreneur needs to get right.

Should you fail to submit your self assessment for a single day you are liable to a fee of �100, with �10 for each additional day you wait, which can combine to a maximum of �1000. At six months and twelve months, in addition to the above charges, you will be charged either �300 of 5% of the tax due � whichever is the higher figure. In some cases you may be asked to pay 100% or more of the total due, on top of the additional penalties.

If you haven’t done so yet, preparing these documents ready will help you when filling out the online form:

Your employment income (plus P45s/P60s/P11Ds)
Your self employed income
Your qualifying expenses (check what qualifies at https://www.gov.uk/tax-relief-for-employees)
Any taxable benefits you have received (Jobseeker’s Allowance, Incapacity Benefit, etc.)
Your pension income
Your investment income
Your property income
Details of any tax reliefs (pension contributions, Gift Aid donations, etc.)

Estimates of these figures may be acceptable in the short term, providing you inform HMRC they are estimates, but you must submit the actual figures at a later date and reimburse for any underpayments you may have made.
Welcome to a special edition of our tax newsletter highlighting key tax announcements in the Chancellor's Autumn Statement on 3 December 2014.
We hope you enjoy reading the newsletter; remember, we are here to help you so please contact us if you need further information on any of the topics covered.

The personal allowance for 2015/16 was originally scheduled to increase to £10,500 but it was announced that this will now be £10,600, so the tax free amount will now be £883 per month. If re-elected the Chancellor stated that this would be increased to £12,500 by 2020.

The point at which higher rate tax (40%) becomes payable will be £42,385 for 2015/16, meaning that the basic rate band will be £31,785. The Chancellor "promised" that this threshold would increase to £50,000 by 2020. The 45% rate will continue to apply to taxable income over £150,000.

Remember that the personal allowance is reduced where the taxpayer's adjusted net income exceeds £100,000. The reduction is £1 of allowance for every £2 of excess income, resulting in a marginal tax rate of 60%. For 2015/16 this restriction is even wider than before with the increase in personal allowance to £10,600

The annual ISA allowance will increase from £15,000 to £15,240 from April 2015. With their longevity and ever increasing allowances, ISAs now represent a substantial portion of the savings of older people. It often comes as a shock to executors and beneficiaries that they lose their tax free status on death. In addition to the inheritance tax charge on the death value, tax is deducted from the income, and capital gains tax may become payable on the sale of the investments.

There were some rather confusing comments about the Chancellor's proposed changes to the 'death taxes' on ISAs, perhaps suggesting a radical overhaul of the rules and abolition of the inheritance tax charge. This is not the case.

As far as we can see from the limited information provided, the proposed changes are fairly minimal but nevertheless a welcome addition to estate planning tools. The changes relate solely to the tax consequences when a spouse or civil partner dies leaving a surviving partner.

Currently, if a spouse or civil partner inherits the ISA account of the first to die, it is exempt from inheritance tax under the general spouse exemption, so there has been no change in this regard. However, because ISAs can belong only to individuals and the amount invested is restricted annually, a spouse may find on inheriting the ISA savings on the death of their partner that they must now be kept in an ordinary taxable account. From 6 April 2015, a surviving spouse or civil partner will be granted an additional ISA allowance equivalent to the value of their partner's ISAs so that the (income and capital gains) tax free status of the savings may be preserved.

In Budget 2011, when he announced the introduction of the two tier remittance basis charge (RBC), the chancellor promised not to make any further changes to the taxation of non-domiciliaries in this Parliament.
True to his word, today he announced changes to the RBC, payable by those who are resident but not domiciled in the UK, which will take effect in the next Parliament:
  • the RBC payable by those who have been resident in the UK for 12 out of the last 14 years will increase from £50,000 per tax year to £60,000 per tax year.
  • a third level of RBC will be introduced for non-domiciliaries who have been resident in the UK for 17 out of the last 20 years, set at £90,000 per tax year.
  • there will be a consultation on having the remittance basis charge apply for a minimum of three tax years to prevent non-domiciliaries from arranging their affairs to pay the charge only occasionally.
The RBC for those who have been resident in the UK for at least seven out of the last nine tax years will remain unchanged at £30,000 per tax year.

The chancellor reiterated the Government's commitment to the pension reforms outlined in the Budget 2014 and recent draft legislation.

He also confirmed the recent announcement to abolish the 55% charge which currently applies on death to all pension funds held by a person who dies over the age of 75, and on crystallised funds held by those who die under the age of 75.

The new proposals announced in the Autumn Statement are that:
  • When an individual dies before age 75, the pension fund, whether crystallised or not, may pass tax free to a nominated beneficiary.
  • When an individual dies over the age of 75, the pension fund, when withdrawn, will be taxed at the beneficiary's marginal rate of income tax.
This relaxation of the pension tax rules on death are extended to include a concession for annuities. Some pensioners, instead of holding a defined contribution pension fund, will have purchased joint life or guaranteed term holder. The proposal now is that the income will be tax free for the beneficiary of the annuity, and that these annuities may be passed to any beneficiary and not just spouses and dependants.

The Chancellor has already announced that the main rate and small profits rate of corporation tax will unite from 1 April 2015. From that date there will be a single rate of corporation tax of 20% and no marginal rate relief.

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