Get your Tax Return right first time!
It’s January and we’re just gearing up to the personal income tax return deadline on 31st. If you’re already glowing with virtue from having already submitted your return – you definitely deserve a gold star (and gratitude from your accountant). However, we know that life sometimes gets in the way and even with the best of intentions haven’t yet got your tax return completed.
When you’re putting your tax return information together, here are some key points to remember to check you aren’t liable for any of these issues.
Child Benefit charge
People’s circumstances change from year to year and, if you’ve had a new addition to your family, you may be unaware of the child benefit thresholds. If you or your partner receives child benefit and either of you has income that exceeds £60k in a tax year, the higher earner is required to pay the high income child benefit charge. This applies whether you are married, in a civil partnership or cohabiting.
The higher earner pays a charge of £1 for every £200 over £60k. At £80k the child benefit received would be fully repaid as a tax charge.
If you and your co-parent split up, the charge will apply during the current tax year, but not thereafter – unless you are the partner earning over £60K and claiming child benefit.
Capital Gains Tax
Assets sold in the tax year (6th April 2024- 5th April 2025) should be reported. There may be no capital gains tax payable, but it is best to let your accountant know so they can ensure any gain is calculated correctly.
Any capital losses can be reported and carried forward to use in future tax years. If you’ve sold a buy to let property, this would have been reported under the 60 day real time reporting scheme, however the gain still needs to be reported on your tax return in the tax year of disposal.
Bank or building society interest
If you are a basic rate taxpayer, any interest income over £1k will be taxable. If you are a higher rate taxpayer any intertest income above £500 is taxable and, if you are an additional rate tax payer, any interest income received is taxable.
Pension contributions
Whether these are contributions to your private SIPP or a workplace pension (but not salary sacrifice), if you are a higher rate or additional rate tax payer the pension contributions made in the tax year will need to be recorded. For a workplace pension if the pension scheme operated is called a relief at source scheme, the additional tax relief will need to be claimed on a tax return.
Property matters
As we outlined last month, any rental income from buy-to-let (BTL) properties you own that exceeds the Property Allowance of £1,000 is subject to tax.
However, if you rent out a room in your home, you can earn up to £7,500 p.a. without any tax liability.
Business property relief/Agricultural property relief (BPR/APR)
There were changes in the Budget, but there was an update just before Christmas. In the Budget it was announced that up to £1 million of qualifying assets could be transferred from one spouse to the other at the death of the first spouse.
There has been an increase to the BPR/APR tax free threshold for Inheritance Tax. From 6th April 2026 this will increase from £1 million on qualifying assets to £2.5m.
There is now also the ability to transfer unused allowance between spouses. This means a husband and wife will effectively have £5 million of qualifying assets that will not be subject to Inheritance Tax.
The rule of thumb when it comes to tax returns is ‘if in doubt, ask your accountant’. Let’s be honest, filling in long forms isn’t everyone’s idea of fun and it’s easy to miss or misunderstand HMRC’s endless questions. Getting someone who is familiar with the paperwork and terminology will save you hours and a lot of stress. If you need some assistance with filling out your tax return, or just need some advice, then get in contact today and the Cook & Partners team will be more than happy to help!
