Should You Take Care of Your Own Taxes?

One of the major downsides of being self-employed is the dreaded tax return and the question of whether you should do it yourself or pay an accountant to do them for you.

Your initial thoughts may be to file your own taxes to save paying someone to do them for you, but you should never underestimate the time and effort it takes to complete your tax returns and the consequences if you get it wrong.

To make matters worse the goalposts sometimes move and the rules can change depending on new tax laws or even if there is a change in your personal circumstances.

Who should complete and file a tax return?

Most taxpayers that are in full time employment do not have to complete a tax return as this is taken care of as part of the Pay As You Earn (PAYE) system on your wages or occupational pension.

This means that you will not be issued with a tax return.

However, you will be issued with a tax return if you are

Self employed

  • A company director (though not if for a not-for-profit company)
  • Have income from rent or properties (there is a lower amount that can fall under PAYE)
  • Have another income that is not taxed by PAYE.

If you are unsure whether or not you fall into any of these categories then you should contact the revenue service at www.hmrc.gov.uk.

Tax return deadlines and fines

The filing dates for tax returns are different depending upon whether you return them using paper forms or online.

The deadline for the paper tax returns is October 31 of the following year.
The deadline for online tax returns is January 31 of the following year.

And the bad news is, if you miss these deadlines then there are some strict penalties:

  • £100 penalty – tax return is one day late
  • £10 per day, up to maximum of £900 – three months late
  • The greater of 5% of the tax due or £300 – six months late
  • The greater of a further 5% of the tax due or £300 – 12 months late

And the worst news is that you could be liable for these fines if you don’t owe any tax or even if you are owed money – so make sure you file your tax returns!

Keeping records

The law dictates that you must keep all of the records necessary to fill in and correctly complete a tax return. Incomplete returns are subject to penalty fees and interest charges. To find out about what records you should keep visit www.direct.gov.uk

Estimates and errors

If you are waiting for information you need to fill in your tax return then you may use provisional figures or estimates so that your return isn’t filed late. Use the ‘any other information’ box or white space on an online return to draw attentions to this.

If you make an error on your tax return then this can be put right by calling HMRC on 0845 60 55 999.

Should you take care of your own taxes?

If you fall into one of the groups that need to fill in a tax return then you need to consider whether you can trust yourself to get it right and if it is worth the time and potential stress. If not, then it may be best to employ an accountant to do it for you.

Rob E is an avid financial blogger and freelance writer for www.click4personalfinance.com and loves to share his knowledge on personal financial.

The ‘Buffett Rule’ For Millionaires – Would It Work?

President Barack Obama and Warren Buffett in t...
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Warren Buffet is a known millionaire – one that has worked his way through life and followed the tax rules. He has many employees. Recently, attention has been called to the fact that his secretary pays less in taxes (or is put to a lower tax rate than he).

Those that see this as impossible simply have not looked at the various head’s of company’s in the past. Yes, they make more money, but yes, they are responsible for a lot more and have to determine how to pay all the bills for a company, hire many employees and allocate benefits for those that work for them. This is why they are able to decrease their taxes because they have businesses and therefore have tax loops and breaks.

Having a business is how the world works. If no one is able to own a business because it is too expensive, then less people have work. One company may employ a variety of people. Their expenses are astronomical. By putting enormous tax burdens on employers, the employment situation will get very dire, more than it already is.

The “Warren Buffett Rule” takes place only in a society where everyone would be consider to make equal wages and pay out equally for where they work. Since that will never be the case, it would simply be impossible to do. By super taxing the very rich and those that own companies and strange predicament would happen. More people would lose their jobs because it would simply have to be.

Fair tax breaks for companies is the only clear way to keep an economy solvent. When companies can’t afford to pay people to work, then the people without jobs can’t afford to do anything and that stops the economy, putting it at far more peril than if people were employed.

The richest people spend more money. They keep a lot of things afloat when they go about vacationing and dining in expensive places. Taxing them enormously will keep them from doing what they need or want to do. When they are out and about they keep many people working in all different industries. That is the way that it will work to the benefit of most people.

Next time someone wants to know how much another is paying in taxes, the clear safe bet is to do your own, pay your own and be glad you have a job. The minute that a person succumbs to the argument of making the rich pay more than the poor, will in turn cause the poorest of all to become unemployed, virtually creating a mere depression of sorts.

The taxes should remain the same, at least for now. More jobs will have promise without raising any taxes. In fact, the more jobs that are created, the better the economy will improve. Otherwise there will be an economic disaster.

Michelle Heyward is a financial advisor, and helps consumers plan for greener pastures.  Did you know you can often save twenty percent on your auto insurance premiums by simply shopping around?  Visit Kanetix to do an auto insurance rate comparison.