UK Tax Return Live Q&A
You may have an accountant or property tax specialist that file your self-assessment tax returns to HMRC or you may be doing your own tax returns. You may in either situation have questions about what income is taxable and what costs may be allowed. This is a great forum for you to pose your question to Louise & Simon Misiewicz and get them answered live.
Frequently asked questions about UK self assessment tax returns?
Q: Do I need to prepare and file a self assessment tax return to HMRC?
A: If you are an employee without any other form of income it is unlikely that you need to do a self assessment tax return. However, here it comes, if you have any other self employment income above £1,000 profit or property profits above £1,000 or investment income then a tax return is most likely required.
You also need to consider your wages. If you earn more than £100,000 then you will automatically be required to complete a UK self assessment tax return.
Company directors that extract money out of their limited company also need to file a self assessment tax return to HMRC.
Q: When do I need to file my self assessment tax return to HMRC?
A: HMRC requires electronic self assessment tax returns to be submitted to them no later than 31st January. For example, Ms Smith tax year-end is 5th April 2022. She will need to file her self assessment tax return to HMRC for 2021/22 by 31st January 2023.
Q: When do I need to pay my self assessment tax liability to HMRC?
A: If you may have a tax liability that needs to be paid to HMRC, it will need to be paid by 31st January per the above example. However, anyone with a tax liability of more than £1,000 that is not collected through employment income will be expected to make a payment in account.
Q: What is the first payment on account?
A: A Payment on accounts is a mechanism for HMRC to collect tax in advance. For example, Ms Smith above had property income only. She made £17,000 and had £1,200 of tax to pay. She will need to make the £1,200 tax payment on 31st January as normal. Ms Smith will also need to make a payment on account of 50% by 31st January being £600.
Q: What is a second payment on account?
A: A second payment on account is the remaining 50% of the tax liability calculated by HMRC. You would already have made the first payment in account, which is 50% of the previous tax liability. The second payment on account to be made on 31st July is the second 50% of the tax liability
Q: What if I have underpaid tax through the payment on account?
A: It is possible like Ms Smith where she has made two payments on accounts amounting to £1,200. When Ms Smith does her self-assessment tax return for 2022/23 it is possible that her tax liability may be calculated as £1,800. This means that she will have to pay the £600 tax by 31st January.
Q: What is I have overpaid tax through the payment on account?
A: We always advise clients to get their self assessment tax return submitted to HMRC as soon as possible. This is especially whereby they believe they have overpaid tax through the payments on account. If Ms Smith worked her tax liability to be only £1,000 and she already paid £1,200 through the payments on account to HMRC she can claim back the £200 overpaid tax through her submitted tax return. Overpayments can only be reclaimed once the tax return is submitted.
Q: Does a self assessment accountant make me tax efficient?
A: The short answer is no. Accountants are professionals that prepare and submit your UK self assessment tax return to HMRC. However, accountants may not feel comfortable giving tax advice because they are more comfortable doing compliance work. A tax advisor is a professional that may not prepare and submit self assessment tax returns but they give proactive tax advice to you. There are rare occasions where an accountant prepares and submits tax returns on your behalf whilst giving tax advice.
Q: Is there a way to share income between husband, wife and civil partners to be tax-efficient?
A: It is possible to change the beneficiary entitlement of an asset between husband and wife. For some assets, it is simply a name change but for some other types of assets, you will require a legal document to demonstrate to HMRC that the beneficial entitlement of an asset has been transferred. There are times when an indirect tax may be charged. This is in the form of Stamp Duty Land Tax.
Q: Is there way to share income between parents and children?
A: In the above example we talked briefly about transferring assets between husband, wife and civil partners. There are no Capital Gains Tax issues when transferring assets between married couples. However, care needs to be taken when transferring assets between parents and children. This is because there could be a capital gains tax liability and / or inheritance tax implication of the transfer itself.
Q: When does capital gains tax need to be reported and paid to HMRC when selling a property?
A: Capital gains tax on the property now needs to be reported to HMRC within 30 days after disposals. This is done via their online Capital Gains Tax submission form
Q: What is there has been an underpayment of Capital Gains Tax when selling a property?
A: An underpayment of Capital Gains Tax will be identified when you submit your UK self assessment tax return. The underpayment of Capital Gains Tax will need to be paid by 31st January along with the other tax payments
Q: What is there has been an overpayment of Capital Gains Tax when selling a property?
A: It is possible that there is an overpayment of Capital Gains Tax in the 30-day reporting to HMRC. Very similar to what we have already said that it is important to prepare and submit your self-assessment tax return as soon as possible. This then allows you to flag to HMRC that an overpayment of tax has been made so that they can then refund you.
Q: I am from America; do I need to do a UK rax return?
A: Similarly to what we have said above, Americans that are tax resident may need to file a UK self assessment tax return in addition to the 1040 tax return submitted to The IRS. Care needs to be taken. This is because there are two different tax years. The IRS in the United States uses a calendar year basis, whilst HMRC in the UK uses a fiscal period from 6th April to the following 5th April. You also need to consider the currency conversions from US dollars (USD) into Great British Pounds (GBP). Additional care is also required because HMRC and The IRS have different tax treatments of both income and costs.
Q: I am from Hong Kong; do I need to do a UK tax return?
A: Similarly to what we have said above, Hong Kongers that are tax resident may need to file a UK self assessment tax return in addition to the tax return submitted to The Inland Revenue Department. Care needs to be taken. This is because there are two different tax years. The Inland Revenue Department in Hong Kong uses a fiscal period from 1st April to the following 31st March, whilst HMRC uses a fiscal period from 6th April to the following 5th April. You also need to consider the currency conversions from Hong Kong dollars (USD) into Great British Pounds (GBP). Additional care is also required because HMRC and The Inland Revenue have different tax treatments of both income and costs.