Doing taxes

UK Tax Frequently Asked Questions

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I think I have paid too much tax, what can I do?

If you are self-employed, Inland Revenue (IR) opens a tax account for everyone who gets a Tax Return and sends out statements. If your Statement of Account shows you are due to a refund, IR will:

  • Repay it if you have asked them to (you can do this on your Tax Return).
  • Credit it to your account, if you are not asking them to repay it.

If you are an employee on PAYE, your employer will normally pay it back to you on the next pay day after you get your proper code. If the tax year ends before you get your proper code, the Tax Office will send you the repayment. It is important to get a form P45 from your employer if you leave your job. If you don’t go to another job and don’t start claiming unemployment benefit, you may be entitled to a tax repayment. After a month, ask for a repayment claim form P50 which you should complete and return to your Tax Office with your P45 Parts 2 and 3 if you have them. Inland Revenue gives repayment claims top priority and tries to make sure you get any refund you are due within 28 days.

If you paid the wrong amount of tax, contact your Tax Office to ask them to check the amount you have paid is correct. If you have paid too much tax, the Tax Office will send you a repayment

I’m a full time student, why am I paying tax?

All individuals regardless of their age are liable to pay Income Tax if their income exceeds their personal allowance. If you only work during the three holiday periods (Christmas, Easter and Summer) and you estimate that your total income for the tax year will be less than the personal allowance, ask your employer for a form P38(S). Return the completed form to your employer to enable your wages to be paid without deduction of Income Tax.

Completion of this form is not applicable if you are working during term time (e.g. evenings or weekends).

What do I do when I go self-employed?

It is important that you notify the Inland Revenue and HM Customs and Excise when you start self-employment. You can notify both departments using just one form: CWF1, which asks for some basic information about your business. You should keep complete records of all your business income and expenditure so that they can be used to calculate your taxable profit at the end of your accounting period. The records should be kept in case the Inspector asks to see them.

Visit the Inland Revenue Starting up in Business pages for comprehensive advice and the form CWF1. You can also register by calling the Helpline for the Newly Self-Employed on 08459 15 45 15.

What expenses can I claim when I am self-employed?

Expenditure can be split into two main categories, ‘Capital’ and ‘Revenue’.

Capital Expenditure – Capital expenditure is expenditure on such items as the purchase or alteration of business premises, purchase of plant, machinery, and vehicles, or the initial cost of tools.

You cannot deduct ‘Capital expenditure’ in working out your taxable profits, but some relief may be due on this type of expenditure in the form of Capital Allowances. Your Tax Office can give further advice on these allowances.

Revenue Expenditure – It is impossible to list all the expenses that can be deducted but, generally speaking, allowable expenditure relates to day to day running costs of your business. It includes such items as wages, rent, lighting and heating of business premises, running costs of vehicles used in the business, purchase of goods for resale and the cost of replacing tools used in the business.

Examples of non allowable expenditure are your own wages, premiums on personal insurance policies, income tax and National Insurance contributions.

Where expenditure relates to both business and private use, only the part that relates to the business will be allowed, examples are lighting, heating, and telephone expenditure. If a vehicle is used for both business and private purposes then the capital allowances and the total running expenses will be split in proportion to the business and private mileage. You will need to keep records of your total mileage and the number of miles travelled on business to calculate the correct split.

Which Tax Office deals with my Income Tax affairs?

If you are self employed you will be dealt with by a Tax Office locally. Employed persons and persons receiving pensions from former employers are dealt with by the Tax Office dealing with the employer’s Head Office. Your local Tax Office will be able to tell you which Tax Office deals with your affairs, or, if you are employed, your employer will also know.

I suspect someone of evading tax, what can I do?

Any suspicion can be reported in confidence to any local Tax Office. Alternatively, you can call the Inland Revenue Anti-fraud Helpline on 0800 788887. It is open Monday to Friday 8:30am to 5pm

Why does the tax year start on April 6?

The reason for the tax year running from 6 April to 5 April is primarily historical and has its origin in the switch from the Julian to the Gregorian calendar in 1752.

It had been calculated in the 16th Century that the Julian calendar had lost 9 days since its introduction in 46 BC. Most of Europe changed to the new, more accurate, Gregorian calendar in 1582, but this country continued with the old one until September 1752 by which time the error had increased to 11 days.

These 11 days were ‘caught up’ by being removed from the calendar altogether – 2 September was followed by 14 September. In order not to lose 11 days’ tax revenue in that tax year, though, the authorities decided to tack the missing days on at the end, which meant moving the beginning of the tax year from the 25 March, Lady Day, (which since the Middle Ages has been regarded as the beginning of the legal year) to 6 April.

The dates were adopted for income tax on its re-imposition in 1842 and have not changed since.

What is Self Assessment?

Under Self Assessment it is clearer what you have to do to get your tax right first time, when you have to do it, and what happens if you don’t meet the deadlines.

It applies to everyone who gets a tax return. However most people do not get a tax return and pay through PAYE or other deduction at source arrangements.

The first Self Assessment tax return was issued in April 1997.

The Self Assessment tax return is made up of a basic core return together with separate supplementary pages – which ones you get will depend on your circumstances and the type of income you receive.

One of the biggest changes is that your tax bill will be based on the figures that you provide on your tax return without IR first checking them in detail and agreeing them. They will check them later, within a year of the final deadline for sending the return back to them (31 January).

You need to fill in your return giving full details of all taxable income and gains you received in the year, and claim any allowances as well. This means that you are responsible for ensuring that you pay the right amount of tax, even if you do not actually work out the tax yourself.

If you have any queries about your tax affairs you can contact your local Inland Revenue office (the telephone number is shown on the front of your tax return). Outside office hours there is also a Helpline facility which you can call on 0845 9000 444 for general advice. (If phoning from abroad the telephone number is: 44 161 931 9070)

What’s better under Self Assessment?

Self Assessment provides:

  • An easy-to-follow return tailored to your circumstances covering all your sources of income and gains, and your reliefs, deductions and allowances for one year.
  • A separate section where you can calculate your own tax, if you wish. If you don’t want to, IR will do it for you
  • One set of payment dates for tax not paid at source
  • One main point of contact for your tax affairs
  • A clear statement of your account with IR, showing payments due and payments made.
  • Who does Self Assessment apply to?

Self Assessment applies to:

  • Self employed people including business partners
  • Company directors
  • Other people with more complicated tax affairs including people who pay higher rate tax
  • Pensioners with more complex tax affairs
  • People who received rent or other income from land and property in the UK
  • Trustees and personal representatives
  • Trustees of approved self-administered pension schemes
  • Non-resident company landlords
  • Must I employ an accountant?

It’ll still be up to you whether to use an accountant or not.

The majority of self-employed people already use accountants and they may want to carry on doing that. Self Assessment brought in new rules that made it easier for you to understand your tax. So if you didn’t use an accountant under the old system, you’re unlikely to need one for Self Assessment.

People find it useful to have accountants for reasons other than dealing with their tax affairs, for example, proper accounting helps them manage their business better.

What are the important dates under Self Assessment?

The important dates for taxpayers are:

Dates for the Tax Return

6th April –The tax year starts on 6 April and ends on 5 April. Therefore the tax year 2012/13 starts on 6 April 2012 and ends on 5 April 2013.

31 October – Final deadline for sending in your paper tax return

31 January – Final deadline for sending in your tax return by submitting it online. If you decide to work out your tax bill yourself you must fill in your return and the calculation and send your Return in by 31 January after the end of the tax year.

You can send in the return earlier if you want. This does not mean that you will have to pay your tax any earlier.

Dates for payments

31 January – This is due date for tax due on your return . This is also the due date for the 1st payment on account for the following tax year.

31 July – This is the due date for the 2nd payment of account.

The payment dates do not change, even if you send your return in early.

Please note that in a few rare cases the payment dates may change, for example if your return was sent to you later than everyone else’s.

How do I know what records I should keep?

You will find it easier to manage your tax affairs if you keep them up to date. If you get behind, you may have to pay interest, surcharges and penalties.

Everyone must by law keep records of their income and their capital gains for at least 22 months after the end of the tax year to which they relate, so that they can fill in a tax return fully and accurately if they get one.

People who have businesses – such as the self-employed and partners and those letting property – must keep their records for at least five years and ten months after the end of the tax year to which they relate.

Where can I get more information on keeping records?

More information on keeping records can be found on the HMRC website on  www.hmrc.gov.uk

What if you need a return and haven’t had one.

You have to tell the IR if you get any income that should be taxed (i.e. taxable income or capital gains that have not been fully taxed at source) and that they might not know about.. They may or may not need to send you a tax return – some taxpayers will be able to pay the right amount of tax through an adjustment to their PAYE code.

Inform IR straight away as the amount of tax that has not been paid at the following 31 January will affect any penalties you may have to pay.

I pay tax through the PAYE (Pay as You Earn) system but I have received a Tax Return. Do I have to fill it in?

If you are sent a Tax Return you must complete and return it on time. The law says that any person may be required by notice to make a return of income and for this reason your Tax Return asks for full details of all your Income and Capital Gains.

Can I send my Tax Return over the Internet?

All tax returns must be submitted online. The due date for online returns is 31 Jan. If you want to submit a paper return , the due date for this is 31 October.

Do I have to send my P60 or a copy of my form P11D / P9D to the IR?

No. Just put all of the details from these forms on your tax return. You should keep your P60 and copy of form P11D / P9D with the rest of your tax records in case there are any queries about your return.More information on keeping records can be found on www.hmrc.gov.uk

If I don’t have the right information can I guess / estimate?

Normally you will have the information you need. But if there is something you are not sure of, you should enter your best estimate in the return and tell IR why a final figure is not yet available and the date by which you expect to give them the final figures. You should then let them have the correct figure as soon as it’s available. You should not leave the relevant box blank, or enter ‘details to follow’ as your return will be incomplete.

Remember: you must send in your return on time, for information on dates and deadlines, plus a handy chart to print out, see ‘Key Dates’.

What do I do if there’s information that I think you need but I can’t find the box / you haven’t asked for it?

The return and guidance notes will help you or your tax adviser decide what information is required to complete your return and self assess. If you’re in doubt about whether additional information needs to be included with the return you can consult your tax adviser or discuss the matter with the IR.

The return has been designed to enable you to include all the details required to self assess, but you can send in additional information if you consider that it is relevant to your tax liability, and it cannot be entered in the spaces and boxes provided in the return. IR will accept any additional information sent in with the return, but recommend that you provide an explanation of why you think its relevant.

I have some unused Personal Allowance, can I set these against my Capital Gains?

No. The Personal Allowance is only available for relief against Income Tax not Capital Gains Tax.

What do I do if I disagree with my employer / bank / etc. about the figures?

You are responsible for the accuracy of your return. If you disagree with the information provided by your employer or bank, you should include the information which you think is correct. You should not delay in sending your return because you cannot agree with your employer or bank over particular figures.

My employer hasn’t shown all my expenses on form P11D / P9D. He says he has a dispensation. What is it?

It’s an arrangement an employer has with the tax office. It saves you the trouble of declaring those expenses covered under the dispensation, and then making a claim for the same amount of allowable expenses you’ve paid out.

I am self-employed. Does the IR want me to send in accounts?

No. The new tax return has been designed to enable the vast majority of taxpayers to provide all the information they need without accounts and computations. For example; IR will ask you to put your accounts information in a special section of the return called ‘Standard Accounts Information’.

Although IR will not normally request accounts, this does not mean that you cannot send in accounts with the return if you want to, for example they may contain additional information you would like the IR to see.

It is the IR’s view that accounts are unlikely to provide them with additional information unless your business is particularly large or complex.

Where do I send my Tax Return back to?

You should normally send your Tax Return to the address on the front of the form. This will usually be headed Officer in Charge. If your Inland Revenue office has changed since your Tax Return was issued you should return it to you current office. You can also hand it in at any Inland Revenue Enquiry Centre (IREC) or local Inland Revenue office if more convenient.

What will happen / What can I expect after I’ve sent in the return?

Normally you will only know that the Revenue has processed your return when you receive your statement of account, showing the tax due based on the figures which you have declared. The only time they will contact you following receipt of your return is when they have had to correct an entry on the return, or they have worked out the tax for you. In these cases they will send you a Revenue Calculation (form SA 302).

How will I know if HMRC will  make an enquiry into my return?

If the IR starts enquiries into your return, they will tell you in writing. They will also write to your tax adviser if you have one.

Is my return more likely to be subject to an enquiry if I self calculate? / file early?

No. Most enquiries will be made on the basis that there is a risk that something might be wrong. A minority of cases will also be randomly selected for enquiry. The date of submission of a return, or whether you self-calculate or not, will have no affect on whether your return is taken up for enquiry.

Will there be random enquiries?

Yes. IR will make enquiries into returns – they will be randomly selecting cases to review for possible enquiry. Some of the returns selected in this way will not result in an enquiry because they can check the entries in the return using the information already in their possession.

If they don’t do these checks, those who want to cheat might think they are quite safe from being caught. IR thinks that random enquiries will help to stop deliberate tax evaders.

They also think that random enquiries might highlight any problems that people have in filling in their returns. This will help IR make the form clearer.

Will IR check my details with my employer / bank / building society?

Yes. They will compare information on the return with information they get from elsewhere such as employers, banks and building societies. If they find any discrepancies they may want to enquire into your return. But you’re responsible for making sure you enter the right information on your return.

What happens if I realize I’ve made a mistake after I’ve sent the return in?

You have one year from the annual filing date (31 January) to make any changes. You can always contact the IR if you need further help.

Do I have to pay more tax under Self Assessment?

No. Self Assessment is simply a clearer and more effective way of making sure you pay the right amount of tax at the right time. It is not a new tax and does not affect the amount of tax you need to pay.

If I owe some tax can the IR collect it through my code number?

Yes, if you want IR to and the total amount is less than £2000. They will send you a statement confirming that it has been done or, if for any reason the amount cannot be collected through your coding, they will let you know.

Can I pay electronically?

Yes. You can pay electronically through your bank’s Internet or telephone banking service. IR also accepts payment by Debit Card over the phone or Internet. Electronic payments are generally more efficient and secure than payments by post.

For full details on how to pay electronically and for details of other methods of payment refer to link www.hmrc.gov.uk/payinghmrc/selfassessment.htm

What Is My NI Number And What Is It For?

Only one number is allocated to you and you keep that same number all your life. It is unique to you and ensures that Department of Work and Pension (DWP – a new Department comprising in parts the former Department of Social Security) correctly records NI contributions or credits to your NI account. You will need these contributions and credits when you come to claim benefit, whether it is for a short while, like Incapacity Benefit or long term, such as your Retirement Pension.

Your National Insurance (NI) Number is personal to you. It is your account number allocated to you for you to use in all your dealings with Inland Revenue and the DWP. It is not proof of your identity. It looks something like this: AB123456C. This National Insurance number is only an example and should not be used as your own number.

Who Else Uses My NI Number?

Your NI number will also be used by:

  • Employers, for the deduction of tax and NI contributions.
  • Jobcentre Plus, to administer Jobseeker’s Allowance.
  • Local Authorities, to administer Housing Benefit.

You must not let anyone else use your number.

What Do I Do With My NI Number?

You should quote it on letters or forms you send to the Inland Revenue, DWP (formerly DSS) or in Northern Ireland, the Social Security Agency.

Keep your number safe and do not disclose it to anyone who does not need it. Remember, its purpose is only to record NI contributions and credits you have paid or are entitled to; and to help decide how much benefit you are entitled to.

Tell your nearest Social Security office (This is a link to the DWP (formerly DSS) website) or Inland Revenue (NI Contributions) office at once if there is a change in your name, address or title so your NI account can be kept up to date. They may need to contact you if you need to pay more contributions in a particular year to make that year count for pension purposes or when you come to claim benefits like Retirement Pension.

If you are employed, you should tell your employer your number as soon as you know it.

Your employer will use it to make sure the contributions you pay are recorded on your NI account. These contributions earn you entitlement to benefit. If your employer does not have the correct NI number then there could be a delay in establishing how much benefit you should get when you claim.

If you are self-employed, you will need your NI number when you apply to pay self-employed NI contributions.

When Do I Apply For A NI Number?

No one has a legal right to a NI number but there are circumstances you are legally obliged to formally apply for one and to register for NI purposes.

Criteria for applying for a NI number

  • If you do not already have a NI number you must apply for one as soon as you start work or you or your partner claims benefit.
  • You must be over 16 years old and resident in Great Britain.
  • If you satisfy all the above conditions except for being resident in GB, and you still want to apply for a number, you must be liable to pay NI contributions or want to pay voluntary contributions and would benefit from doing so.

Providing you satisfy these conditions, you should contact your nearest Social Security office (This is a link to the DWP (formerly DSS) website) and ask for an appointment to be interviewed for a NI number. At the interview you will need to be able to prove your identity.

You can find out information about the types of documents you should provide to help establish your identity in leaflet GL25 available from any Social Security office (This is a link to the DWP (formerly DSS) website).

What If I Have Already Been Given A Number But I Can’t Remember What It Is?

If you think you already have a number but cannot remember it, see if you can find it on any official papers you may have at home. Look on any of the following:

  • An end of year statement of tax and NI paid. (P60)
  • Payslip, recent or old.
  • Official correspondence.
  • Annual tax return.
  • Sub contractors tax certificate. (CIS6)
  • Employers wage records.

Your number will not change. Even if for example, you go abroad, marry or change your name your NI number will stay the same.

If you can’t find your number, ask at your nearest Social Security office (This is a link to the DSS website) or Inland Revenue (NI Contributions) office and they will tell you what to do.

Will I Get A Number Automatically?

The only people who are automatically registered are those under 16 years old, who live in Great Britain and for whom Child Benefit is in payment. They are automatically registered and a NI number card sent to them just before their 16th birthday.

If these young people do not receive a card they will have to apply for a number in the same way as everyone else (see When do I apply for a NI number). This means they must both be working or claiming benefit and satisfy the criteria shown above.

The NI Number Card

A plastic NI number card is issued automatically when you first apply for a number or if you change your name on marriage.

It is meant to be a reminder of your number and nothing else. It does not provide proof of your identity and should not be used as such.

If you live abroad a card will not be sent to you. If you live in the United Kingdom but have no permanent address you will be able to collect your card from the Social Security office about 8 weeks after your application is made.

If you live in Wales, you may ask for your card to be printed in both English and Welsh. Tell the office where you apply for your NI number that you would like a bilingual card.

Take good care of your card. You will only be sent one replacement if you lose it.

I’ve Lost My NI Number Card

Report it to your nearest Social Security office (This is a link to the DSS website) or Inland Revenue (NI Contributions) office. If you want a replacement card you will need to complete an application form. Remember, you are only allowed one replacement.

Does DWP Need To Know If I Move Or Change My Name?

Yes they do. Please write to your nearest Social Security office (This is a link to the DWP (formerly DSS) website) or Inland Revenue (NI Contributions) office quoting your NI number. Tell them what change has occurred e.g., new address or change of name and when it happened.

If you do not tell them when you move, marry or otherwise change your name they will not be able to keep your records up to date. This means they will be unable to contact you if they need to; for example, if the contributions you paid in a tax year are not enough for that year to count for benefit purposes. They would normally write to let you know and to tell you how much you could pay in voluntary contributions to make that year count.

If you change your name, please return your old NINO card to your nearest Social Security Office when applying for a card in your new name.

Also, when you are nearing the State retirement age, they invite you to claim any Retirement Pension you are entitled to. They cannot do this if they do not have your current address. If you are a woman you should tell them if you get married or become divorced or widowed. All these things may help improve the amount of pension you are entitled to when you come to retire.

How much NICs must I pay on my wages?

The amount of NICs to be paid is calculated on the amount of gross pay an employee receives.

When do I start paying NICs?

An employed earner, between the ages of 16 and state pension age, must pay Class 1 contributions on gross earnings which fall between the Primary Threshold (PT) and the Upper Earnings Limit (UEL). However, NICs are treated as actually having been paid on earnings at the Lower Earnings Limit up to and including the Primary Threshold. As such, the Lower Earnings Limit is the point at which a person can start to build up entitlement to contributory benefits and the Primary Threshold is the point at which they start to pay NICs.

There is no UEL for employer NICs.

What benefits do I get from paying NICs?

Payment of Class 1 contributions gives entitlement to: -

  • Incapacity Benefit
  • Jobseeker’s Allowance
  • Maternity Allowance
  • Retirement Pension
  • Widowed Mothers Allowance
  • Widows Payment
  • Widows Pension

Each of the above has its own different “qualifying conditions” which must be satisfied before payment can be made. Further advice on the various qualifying conditions can be obtained by contacting your local Benefits Agency (this link will take you to another web site) office.

What happens if I become sick – does my employer continue to deduct NICs at the same rate?

If the employee’s gross pay, including any statutory or other sick pay is above the LEL, NICs are due.

What happens if I have more than one employment – do both employers have to deduct NICs at the full rate?

If a person has more than one job, both employers have to deduct contributions subject to the gross pay being above the Lower Earnings Limit. If the total employee contributions payable in the employments are likely to exceed the annual maximum contribution payable, a deferment certificate may be obtained.

If I have paid too much in NICs, how do I claim a refund?

Apply to:

Refunds Group
Inland Revenue National Insurance Contributions Office
Benton Park Road
Longbenton
Newcastle upon Tyne
NE98 1ZZ

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