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Beat the self-assessment deadline - and save money!

With the January 31st self-assessment deadline looming, if you’re self-employed or a higher rate tax-payer you’ve got to act quickly or face a fine!
Bernard Oster from Tax Watchdog, one the UK’s leading independent tax specialists for the self-employed and small-businesses is here now live and online so if you have any tax or self-assessment questions, just ask away - now!

Moderator: Welcome Bernard...is this a busy time of year for you!
Bernard Oster: Yes, a very busy time of year, getting all the final late returns out.

Sophie P: I'm just starting out as a freelancer and have been told that I won't actually pay any tax until January 07. How can I prepare for this lump sum bill, and have you any tips on how I can estimate how much it will be?
Bernard Oster: It is advisable to put some money away for the eventual tax liability. As a rule of thumb, if you feel that your net earnings are going to exceed £5000, it may be advisable to keep approximately 20% back for the eventual tax liability. I must stress that this is just a rough rule of thumb.

Q1: Do you pay tax on compensation?
Bernard Oster: Compensation for loss of office is tax free if it's non-contractual.

Tony: 1. I’m not self-employed and have never had to fill out a self-assessment form, but think that maybe I ought to. When should I be filling one in?
Bernard Oster: If you are not self-employed there is no need to complete self-assessment return unless you have income which falls into the following criteria: - You have tax due at the end of the year which cannot be collected through your PAYE tax code; You receive income from property which is more than £2500; you sell or give away chargeable assets in excess of £32,800; you earn more than £100,000pa; you have investment income of more than £10,000pa

Jackie: if i am entitled to a refund do i get in in a lump sum or how is it paid to me thanks
Bernard Oster: The refund is normally paid in a lump sum with interest for any previous tax years. Some smaller refunds can be repaid by way of an increase to your current tax code.

Bob Horton: I don't think all the parts on my return form apply to me. Can i leave these blank or write something in to explain etc?
Bernard Oster: If you know a section of the tax return is not relevant to you you can leave it blank. However, if you are uncertain about any section of the self assessment form, it is advisable, to make a comment on page 10 of the return in the comments box. This should contain a full explanation of the particular circumstance leaving HMRC in no doubt that you have made a full and frank disclosure.

Emmalina: Hi, If I am currently employed and I want to start a business (web based) will I pay more tax because I am already employed?
Bernard Oster: Your allowances will be applied to your income from employment and any profits you receive from your web-based business will be subject to your normal rates of tax.

Shaun of the Bread: Can I attach extra pieces of paper? There's not enough room to fit all the info in.
Bernard Oster: If you do not have sufficient room on the tax return to make any explanation of the information provided it is quite in order to use additional pieces of plain paper. However, you should request additional pages from HMRC for any that do not provide enough space for you, e.g. capital gains pages. Alternatively these can be printed off HMRC website at www.hmrc.gov.uk

Susan: Hi Bernard, i have just started as a party planner for a cosmetics company. Will i have to register as self employed?
Bernard Oster: Yes, if you feel you will earn a net income from the business.

Justin: Would you recommend filing returns online rather than doing it by paper and posting?
Bernard Oster: Yes. However, you should be aware that you have to register with HMRC that you wish to file online at least 7 days in advance. You need an activation PIN number to file online and this will be posted to you by HMRC, so you shouldn’t wait until the night before the deadline to decide to file online.

Chris N: I was fined last year for filing my tax return late - can I claim this as a deductible expense in my accounts this year as I intend to file early this year?
Bernard Oster: No!

Show me the money!: How do I know if I have paid the Inland Revenue too much money? If I have - how can I claim it back?
Bernard Oster: Recognising that you have overpaid tax is not easy but if you are certain that you are due a refund and are in employment you can write to HMRC and request that they formally assess your affairs in which case the overpayment will be computed and a cheque sent to you. There is a danger that this course of action could lead to you paying tax where your liability has been under assessed and you misinterpreted your affairs. If you are out of work or have given up and PAYE has been taken off you since 5 April last, you should complete form P50 that can be obtained from any tax office.

Mo: I belong to Charities like RSPB and National Trust do these count against tax and which box? Thanks
Bernard Oster: No they don't count against tax, but if you tick the Gift Aid box the charity will benefit from either 22% or 40% uplift depending on the rate of tax you pay.

Moneymaker: I’m struggling to complete my return by Jan 31 – can I avoid a fine if I don’t manage to get It done?
Bernard Oster: If you do not meet the filing deadline of 31st January the Inland Revenue fine you £100. In addition, there will be interest payable on any tax due and if the tax is still outstanding on the 28th February there will be a further 5% surcharge. If, however you do not have a tax liability and submit your return late the penalty charges will be waived.

Sally Exeter: I’ve read that often people have the wrong tax codes. How do I know if I have the right one?
Bernard Oster: The Inland Revenue grant a personal allowance to every taxpayer, which is currently £4895. There are certain circumstances in which additional allowances can be claimed for example; expenses incurred during your employment; certain professional subscriptions, or allowances for marriage where either spouse was born before 06/04/1935, or for some earlier tax years relief was available for children. For individuals paying tax at the higher rate, relief is also available for pension contributions and gift aid payments. If you feel you have a claim then you can either seek the advice of a professional or alternatively write to HMRC with details of your claim and if it is agreed they will amend your code number accordingly. Repayments can be made retrospectively where the claim goes back for 6 years.

XXX: I am selling a gift property soon - i have never filled in tax returns b4 - do i have to once the property is sold?
Bernard Oster: If you make a gain, then you do need to. If the property makes a gain in value of over £8500 you will then pay tax at your marginal rate on the excess.

Perminder L: I have been selling items through a well known online auction site - Will the Inland Revenue class this as being a trade and should I be filling in a Tax Return? Thanks.
Bernard Oster: If you are just selling household goods or chattels, then no. If you are buying goods to sell at a profit, then yes!

Margaret: Are gains on a Personal Investment Plan subject to Capital Gains Tax ?
Bernard Oster: It depends on the type of plan it is. If it is a PEP or an ISA, then no.

Dave: How long can i stall paying for
Bernard Oster: Technically, you can't! But if you are experiencing real hardship and have exhausted all areas to raise the money, HMRC will often accept a payment over a period of 3 months.

Correction: On one of your answers below, you have stated that the tax allowance for each person is £4895.00. Please note that this is for 2005/06, We are dealing with tax issues for 2004/05
Bernard Oster: The allowance for the year 2004/2005 was £4745. Age allowance can take this up to £6830 for the over 65s and £6950 for over 75s.

Dill: I have a full time job in higher rate PAYE. For the last 6 months I also have a part time job that pays around 100 pounds per week. This is not taxed. What do I do?
Bernard Oster: You should advise the tax office about this second income as you are due to pay tax on it - also at 40%

Nez: I have recently received a letter from the Inland Revenue explaining that I should have completed a return in 2004. i was not aware i had to and received no return to complete? what should i do?
Bernard Oster: If you receive a return for a previous year you normally have 90 days from the date of issue to complete the return in which case you will not be charged a late filing penalty of £100. This will be made clear in the covering letter accompanying the return. If it transpires that you should have filed an income tax return and omitted to advise the Inland Revenue then a late filing penalty of £100 will be imposed from 31st January 2005 and then at 6 monthly intervals until the date the return is filed.

Fozz: I left the UK part way thru the tax year. Do I still get a full year allowance?
Bernard Oster: Yes you do.

Steve: Im a student do i have to pay tax
Bernard Oster: Yes, if you earn over the personal allowance for the year, but you should complete a P38S form. In which case your employer can make payments up to the personal allowance without deducting any tax.

Taj: I have recently been made redundant - i was on a 50k package, can i claim back any tax that i have paid?
Bernard Oster: It depends on the circumstances. If you were contractuallty obliged to receive the package it is taxable in full. If you were not contractually obliged the first £30,000 is tax free.

Lara: When do you have to pay corpooration tax
Bernard Oster: Assuming you make a profit, 9 months and one day after the year end of the company.

Deepwater1: May I claim my wives unused tax allowance. I'm 53, wife is 59.
Bernard Oster: No

J: I work in a busy accountancy practice and each year it is the same, clients coming in at the last minute despite repeated reminders. Any suggestions on how to avoid this next year?
Bernard Oster: Hi there, come and work for Tax Watchdog

Radioboyo: I am leaving the country shortly should l inform the Rev ?
Bernard Oster: Yes, you will require form P85

Howard A asks: I get rental income from my holiday home in Spain – at what threshold do I have to declare this?
Bernard Oster: At £1!

Tony: I am just doing my first ever return now. Does this mean I will have to complete one every year from now on?
Bernard Oster: No, it all depends upon your personal circumstances.

Loki182: At what wage should you start paying tax?
Bernard Oster: £94 per week

Andrew Summers: I don’t want to pay my tax bill! Not in one lump sum anyway – is there any way of delaying paying it all in one go?
Bernard Oster: Strictly speaking it is not permissible to pay your tax bill by instalments. There are occasions when HMRC will agree a repayment schedule with you depending upon your circumstances. Normally, the payment will have to be made over 3 months and interest will be payable on that proportion of the tax paid late. However, in certain severe cases the Revenue will agree a longer period. This will usually entail you submitting a full statement of your assets and liabilities together with details of your income and expenses so that a fair proposal can be agreed. However, you must also show that you have exhausted all other avenues of raising finance such as a bank loan or help from a relative or friend.

T: How many years can the revenue go back to check
Bernard Oster: The revenue can go back 6 years, but in cases of serious fraud up to 20 years.

Anon: My son owns a flat and has taken a temporary lodger who is paying him £50 per week. Is this taxable
Bernard Oster: The income should be decalred, but there will be no charge if it is less than £4250 per annum

Radioboyo: If l live in another contry and work here for 4 months do l have to pay tax. As the superstars do it tax free
Bernard Oster: Yes, but you would get the benefit of the UK personal allowance, but there could be issues of residence, domicile etc

Andy Mull: My new payslip has "taxed at source" on it. What does this mean?
Bernard Oster: It seems most unusual and you should ask your employer

John Smith (lincolnshire): Hi Bernard, I am just sending my tax return off tommorow. Do you think it will make it in time to avoid the penalty?
Bernard Oster: There is a week to go, but It may be adviseable to hand this in to your tax office.

Pedantic: In what way are you a watchdog?
Bernard Oster: Our business reflects what our tax services are about. We specialise in looking after tax affairs for working people, those in receipt of a tax return and small businesses. All our fees are clearly stated before you sign up for our service and we pride ourselves in providing a comprehensive service on a fixed fee, low cost basis. See our website for details!

Jason: I am about to change jobs. Will my Tax Code Change, when I start my new Job?
Bernard Oster: Not necessarily, if you hand your P45 in to your new employer.

Anon: Hi Bernadrd, how strict is the taxman about keeping your records for the full 6 years? What penalty can be imposed for not keeping them long enough?
Bernard Oster: If the tax man discovers you have not kept your records for the 6 year period, the maximum penalty is £3000.

DaveyB: Can I be employed by a company and also be self employed in my own business?
Bernard Oster: Yes

Cobby: What happens when i get my personal pension, can i extend my tax rate bands ??
Bernard Oster: If you are a higher rate tax payer you can claim the extra 18%

Neil: Will you complete my tax return?
Bernard Oster: We have our hands full at the moment - we are extremely busy but would be delighted to help you next year.

Simon: Thanks everyone for your questions - the chat has now finished.
Bernard Oster: Thanks everyone - it's been an interesting experience and a great pleasure.

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