'Don't pay too much tax' warning
EVEN if, despite the current postal disruptions, you did manage to send your tax return in to the tax man before October 31 this year, you could end up paying more tax than you should, warns Alan Blake a Partner at Streets Chartered Accountants. The deadl
EVEN if, despite the current postal disruptions, you did manage to send your tax return in to the tax man before October 31 this year, you could end up paying more tax than you should, warns Alan Blake a Partner at Streets Chartered Accountants.
The deadline for getting your tax return to the HM Revenue and Customs (HMRC) was last Saturday, if you were filing a paper version and you want the Inspector of Taxes to calculate your tax.
This year, however, there is a real danger that the HMRC's basis for calculating the taxes to be paid on 31 January and 31 July 2010 will result in many people paying too much tax.
That is because the payments on account for the year ended April 5, 2010, are calculated on the basis that your income will be the same as for the previous year. Because of the fall in interest rates and the general reduction in investment income, most people will have a fall in income for the current tax year. Unless you review your payments on account and take advantage of the ability to apply for a reduction you will be effectively lending money to the Revenue until January 31, 2011, Mr Blake reckons.
A similar problem exists if tax is collected on investment income through your coding notice and PAYE. A taxpayer does not have to pay tax on investment income through PAYE and may elect to pay the tax on the normal due dates.
In the current climate, where incomes are under pressure, effective and efficient tax planning is as important as ever, he added.
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