Hello everyone,

This month we provide a summary of points to consider when completing tax returns and whether you need or should submit a return. As ever do get in touch if you have any questions.

Kind regards
Simon

Tax Returns!

We are now nearly two months into the new tax year and it is time to think about completing tax returns! Tax return information should be available with banks and brokers making annual reports available online or sending them out and employers issuing end of year details.

We are asking all clients to provide their tax return information by 15 July and no later than 15 September 2025. These dates are so that we can:

• Advise you of tax liabilities in good time to help you plan your cashflow;
• Allow us time to deal with any issues arising from tax returns and any related planning required;
• We are aiming to submit all tax returns by 30 November this year, this will mean we can all enjoy Christmas without the thought of tax returns hanging over us!
• For sole traders and property owners who will be subject to Making Tax Digital and quarterly returns from April 2026 it is particularly important to be up to date with returns to ensure you are able to comply with the new system (we will be writing separately on this to those effected).

Clients are asked to forward their tax return details as soon as available. A big thank you to all those who have already sent in their tax information. Everyone who sends in their tax return details by 15 July will be entered in our annual prize draw.

 If individuals have to make their next payment on account by 31 July expect their income to have fallen for last year compared to the year before, payment may be reduced. It is recommended that last year’s tax return is completed before the end of July to determine the required payment. If you think this may apply please get in touch as soon as possible.

Points to remember when completing tax returns

Income
Make sure you include all sources of income and capital gains. HMRC are increasingly identifying omissions in returns and may  seek penalties and interest where additional tax becomes due. Points to remember are likely to include:

• For earnings, a P60 certificate of earnings should be issued by the end of May and if you receive any benefits, you may receive a form P11D detailing the value of all benefits received which will need reporting;
• Members of employee share schemes should ensure they receive full details of what to report from their employer.
• Interest on all bank accounts and dividends from shares should be included on your return;
• Dividend income outside of ISAs should be reported, where dividends exceed £500 there will a charge to tax of 8.75% for basic rate tax payers, 33.75% for higher rate tax payers and 39.35% for additional rate tax payers.
• Rental income even if loss making needs to be reported and a record of losses kept. Only the interest element of mortgage payments are deductible and an interest certificate should be obtained.
• Buying  and selling cryptocurrency e.g. bitcoin  is a taxable transaction usually subject to CGT not income tax. The exchange of one cryptocurrency for another is a taxable event.
• If child benefit has been claimed and the income of either partner exceeds £60,000 this will need reporting and the higher income child benefit charge will apply.

Deductions
As well as including all income, it is important to claim all deductions to help save tax!

• Pension contributions –contributions to all pension schemes and the increase in value of interests in final salary pension schemes need to be considered, if the total amount for any year exceeds the annual allowance then this may need to be reported on your tax return and a tax charge may arise. Members of final salary schemes should receive a letter from their scheme administrator advising them of the change in value of their pension rights and it is this information that will be required. Individuals whose adjusted total income exceeds £260,000 should be aware that the pensions annual allowance will reduce by £1 of each additional £2 of income with the annual allowance limited to £10,000 once income reaches £360,000.
• Higher rate tax payers paying personal pension contributions need to claim the additional tax relief through their tax return. This can also apply to some employer  pension schemes where only basic rate tax relief is given automatically and higher rate tax relief needs to be claimed e.g. NEST
• Include all gift aid payments to claim higher rate tax relief – this can include National Trust and other memberships if gift aid declarations have been made.
• Employees who are paid less than the authorised mileage rates for business mileage can claim the shortfall on the authorised rates of  45p per mile for the first 10,000 miles and 25p per mile thereafter via their tax return.
• Professional subscriptions paid personally can be claimed on your tax return.
• Investors in EISs and VCTs will need to claim tax relief for the investments through their tax returns once they receive the tax certificate from HMRC.
• Marriage allowance – married couples can transfer part of their personal allowance between them, if your income is less than the personal allowance and your spouse is a basic rate tax payer you can transfer 10% of your personal allowance, for 2024/25, this is £1,260 and worth £252.

Capital Gains

• Capital gains should be reported where the chargeable gain is expected to exceed the annual exemption (£3,000) or the proceeds exceed £50,000.
• Sales of UK residential property other than houses fully qualifying for principle private residence relief should have already have been reported within 60 days of completion but will still need reporting on a self-assessment returns if completed.
• Transfers between spouses are generally exempt, however transfers to other relatives will be deemed to be connected party transactions at market value. A capital gain may arise when a gift is made: for example: — if a parent gives a property to a child, there will be a capital gain to the extent that the market value of the property at the date of the gift exceeds the original cost.
• Capital gains can arise on the disposal of most assets, however there are some exemptions including: motorcars, personal effects and goods worth up to £6000 each, UK government stocks (gilts), assets held within an individual savings account, foreign currency for personal use and an individual’s principal private residence.
• If assets sold were held at 31 March 1982, then you can claim to use the market value at this date rather than original cost. Time should be allowed for obtaining a professional valuation, so that returns can be completed in good time.
• Where valuations are required to calculate the capital gain, they can be agreed in advance with HMRC by submitting the form CG 34 to avoid subsequent enquiry.

If a capital gain has risen in the last tax year, there may still be scope for planning to shelter the capital gain may be possible, as capital gains can be deferred against investment in enterprise investment schemes undertaken in the 36 months following the disposal. Alternatively, if investments have become of negligible value, a claim can be made to treat the asset as disposed of to crystallise the loss and this can be backdated up to 2 years. Ideally, we would recommend people consider their capital gains tax position prior to disposing of assets to maximise the opportunities for planning and we would be happy to assist clients with this.

Do you need to complete a tax return?

If you do not receive a request to complete a tax return it does not mean that you do not need to complete one. An individual needs to submit a tax return if they will have a liability to income tax or capital gains that will not be covered by tax deducted at source. Situations where a tax return may need to be completed for the first time may include:

• Self-employed income over £1,000
• You were a partner in a business partnership
• Starting to receive untaxed income e.g. rental income from a buy to let property or untaxed investment income
• Taxpayers receiving dividends in excess of the dividend allowance of £500 ( for last year) may need to complete a return as the excess over the £500 allowance will be subject to tax even for basic rate taxpayers.
• Investment income over £10,000.
• A disposal of assets (including gifts to family members) giving rise to a capital gain in excess of the annual exemption (£3,000 for 2024/5) or proceeds of £50,000
• Becoming a director.

There may also be situations where an individual may need to submit a return to ensure that they do not pay too much tax, typically this could occur when:

• For higher rate tax payers who need to claim relief for personal pension contributions and gift aid payments;
• Individuals with a number of different sources of PAYE income may pay too much tax via PAYE as the codes are frequently incorrect – typically this may apply to pensioners particularly for those with overseas pensions;
• Anyone needing to obtain tax relief for work related expenses e.g. professional subscriptions;
• Anyone paid mileage allowance for business travel at less than the authorised mileage rate of 45p / mile for the first 10,000 miles and 25p / mile thereafter can claim tax relief for the shortfall via their tax return.
• Claiming tax relief for EIS and VCT investments

We should be happy to discuss with readers if they have concerns over the need to file a tax return or think they may benefit from doing so. HMRC are increasingly keen to take people out of self-assessment, however individuals should be aware that it is still their responsibility to report new sources of income and that if relief is required for expenses a claim still needs to be made. Further guidance and an online tool to check if you need to send a return can be found here.