Self-assessed people (including sole traders, partners, proprietary directors, PAYE employees with rental income etc.) have to make a return of income by the end of this month (or mid November if filed online). Worse again they must also pay all outstanding taxes due for 2010 and a corresponding amount for 2011 in many cases to prevent nasty fines. To avoid the severest of haircuts Numbercruncher advises the following no-brainer tips to save you money.
Pay on time and on-line
The easiest money Revenue can ever make is surcharging people for late returns. (5% within two months, 10% thereafter) This tip sounds obvious but paying and filing on time is the number one way of minimising a tax bill. Filing late on the other hand not only costs extra money but it is by some distance the best way of attracting a revenue audit. The deadline for returns is 31 October but is extended to the 15 November for filing online.
Investment in Pensions or BES
Yes it is almost a cliché at this time of year but pension investment is a very tax efficient one. It is also one of the only reliefs that is allowed up to the deadline date. If you’re in the pension business this is your Christmas shopping season. Business Expansion Schemes (BES) are tax efficient ways to invest in the private sector. While pension investments cannot be accessed until you retire, BES schemes only require 5 years. Pensions and BES are still allowed at the top rate of tax but for how much longer?
Although it is another cliché please note that when you invest in anything you take a risk and you could end up with nothing. You should ensure that your whole investment is sound and not just based on a short term tax relief.
Are you maximising what you are claiming?
Another Revenue earner is the amount of unclaimed tax refunds that have been foregone by PAYE workers. This can be put at between €200m and €1bn depending on how you measure it. The other staggering fact is that you can only claim up to 4 years back with Revenue, before that it’s all theirs. This means that 31 December 2011 is the last deadline for claiming anything on your 2007 return.
In my experience one of the best sources of credits and reliefs is unclaimed health expenses, which alas have reverted back to standard rate in 2010. Permanent Health Insurance or Income Protection is still available at the top rate but most things have been standardised at this stage. I would urge readers to check out this link on the Revenue’s website and find out what they should be claiming.
Accounts and Expenses
Whether you are a sole trader or a company director you should make sure that you are preparing your accounts and calculating your income after deducting all allowable expenses. Travel and Subsistence is an often overlooked area where there are significant savings available especially for company directors. Are there amounts being assessed as your income in 2010 that should rightly be classed as business expenditure? You should discuss this closely with your accountant or tax advisor.
Preliminary Tax 2011
This is an area where you can make immediate savings in your tax bill. The general rules on this are that you must pay 100% of last year’s (2010) liability or 90% of the current year. Although 2011 is not completed yet you can estimate your liability based on the likely outcome for the year as opposed to basing it on last year’s figure. Depending on how your 2011 is progressing this may be another easy way to reduce your tax bill this year.
So the clock is ticking but you still have enough time if you get a move on. These are 5 possible ways of reducing the tax that you pay in a few weeks time and you should make sure that you discuss with your accountant or tax advisor.
- Pay on time
- Invest in a pension or BES
- Claim all credits and reliefs
- Ensure all business expenditure included
- Reduce preliminary tax figure