Think you don’t have to file a tax return? Here are five reasons why you might need to
Think you don’t need to file a tax return for 2018/19? Perhaps it’s time to double check.
Around 750,000 taxpayers miss the Jan 31 deadline each year, often simply because they are unaware they need to file a return. It’s a common misconception that filing always leads to paying extra tax – sometimes it can trigger tax reliefs and refunds.
Have you claimed for your pension contributions?
Tax relief is available on pension contributions at your highest rate of income tax. Higher or additional rate taxpayers can claim an additional 20pc and 25pc tax relief respectively if they are not in a net-pay or salary-sacrifice pension arrangement through their employer but instead make direct pension contributions.
Investments into venture capital schemes
Venture capital schemes, for example the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and venture capital trusts, offer valuable income tax and capital gains tax relief to encourage you to invest. If you have made eligible investments into these schemes you should claim income tax relief on your tax return for the year in which the shares are issued to you.
In some circumstances, you can also elect to carry the contributions back to the previous tax year, which can be beneficial in tax terms. Independent financial advice should be sought if this is relevant to you.
Have you made any capital losses?
If you have made any capital losses, you must first set them against any other gains in the same tax year even if the gains are covered by your annual exemption – this means you may waste your annual exemption. If, after doing this, you still have losses remaining, you must let HMRC know in your tax return so that you can carry the remaining capital losses forward – only losses that have been ‘claimed’ in this way can be used against gains made in a later year.
Did you sell substantial chargeable assets?
If you are not registered for self-assessment and your total gains are less than the annual exemption (£11,700 for 2018/19), you still need to report them on a tax return if the total sales proceeds were more than £46,800. It is important to note that this threshold relates to the proceeds, so even if you made no profit, or even a loss, you still have to submit a tax return.
Maximise your charitable gifts
If you have made a gift to charity under Gift Aid, the Government gives the basic rate tax relief to the charity. Higher and additional rate taxpayers can claim relief on the difference between their top tax rate (40pc or 45pc) and the basic rate (20pc) on the donation.
If you have not told HMRC about your gifts before, you can submit a tax return to claim relief. Also, if you make Gift Aid donations before Jan 31, elect for them to be treated as made in the 2018/19 tax year to accelerate tax relief. Then you can use the refund to make another gift.
There are many additional reasons to file a tax return. If you are unsure whether you need to, visit HMRC’s tool for further guidance.
Dawn Register is a partner in tax dispute resolution at accountancy and business advisory firm BDO.