The tax year 2010-11 is over and what to do as an employee?

As an employee you always have the right to submit a tax return to HMRC. However, this is not compulsory in most cases, because employees usually pay their taxes through the taxation system called PAYE (Pay As You Earn). Using the PAYE system, your employer calculates and deducts Income Tax from your gross pay every time you receive it. In other words, your Income Tax is paid in advance by means of deductions from your gross pay.

It often happens that PAYE deductions exceed your actual liabilities resulting from Income Tax. To claim the overpayment you must submit your tax return to HMRC, otherwise you will loose the money you are entitled to. That is why completing a tax return is always advisable.

There are specific categories of employees that must submit their tax returns to HMRC. These are company directors, ministers of religion and names or members of Lloyd’s.

Apart from that you must complete a tax return if one or more of the following circumstances apply:

• Your income from employment is £100,000 or more.
• Your income from savings or investments is £10,000 or more.
• Your income from untaxed savings or investments is £2,500 or more.
• Your income from the property before deducting allowable expenses is £10,000 or more.
• Your income from the property after deducting allowable expenses is £10,000 or more.
• You receive an annual trust or settlement income on which tax is still due.
• You receive an income from the estate of a deceased person on which tax is still due.
• You receive any foreign income that must be taxed in the UK.
• You want to claim for expenses or professional subscription of £2,500 or more.
• If you get a reduced age-related allowance, because you are over 65, but your annual income is over £24,000 for the tax year 2011-12.
• If you must pay Capital Gains Tax (CGT).
• If there have been any changes to your tax code.
• You have lived or worked abroad or you are not domiciled in the UK.
• If you are a trustee or personal representative.

There several legal obligations you must comply with when filing a tax return as an employee. These are:

1. You must register with HMRC for Self Assessment before you will be allowed to submit a tax return. You will need your National Insurance Number (NIC) and contact details to register for Self Assessment. After the registration you will receive a Unique Taxpayer Reference (UTR), which is your personal tax number, for example 1234567890 issued by HMRC.
2. There are two tax return deadlines depending on which tax return form – paper or online – you prefer. The paper tax return must reach HMRC by 31 October following the end of the tax year; the online one – by 31 January following the end of the tax year. To submit an online tax return you need to register for HMRC Online Services beforehand. In both cases, you will need to use your Tax Code and Unique Taxpayer Reference (UTR), issued by HMRC.
3. You must pay all your tax liabilities by 31 January following the end of the tax year.

Capital Business Links Ltd experts are readily available if you need any assistance to sort out your taxation issues. To learn more about our services or to make an appointment with one of our tax advisers, please contact us on telephone number 0208 567 99 44 or use our contact form.