Working Family Tax Credits

Are you missing out on money that is rightfully yours or have you forgotten to renew tax credits that you were paid last year? You could be entitled to tax credits if you earn up to £66,000 in certain circumstances. Astonishingly, more than £3.9bn in tax credits went unclaimed last year, according to research by unbiased.co.uk, the professional advice website. With the renewal deadline a week away, those who currently claim their tax credits could find their payments stopped if they do not file renewal forms by July 31. Read on to ensure you are getting what you are entitled to.

WHAT ARE TAX CREDITS AND HOW DO I QUALIFY?

Working tax credit and child tax credit are benefits paid by HM Revenue & Customs.

You can claim the CTC even if you and your partner are working as long as your income is less than £66,000 a year. The amount you get will depend on how many children you have, how old they are and whether they have any disabilities.

The WTC is a payment to top up the earnings of working people on low incomes (typically about £16,000 or less) regardless of whether they have children. Extra amounts are payable if you have a disability, or if you work 30 hours or more a week and have child care costs.

HOW DO I QUALIFY FOR CHILD TAX CREDITS?

You can get CTC if your income is less than £66,000 a year and you are responsible for at least one child aged up to 16, or up to 19 if they are in full-time education or on an approved training course.

The amount of CTC you get will depend on circumstances and your income. You can get it on quite high gross incomes, including incomes of up to £58,000, or £66,000 if the child is under the age of one. If you live with your partner, your incomes will be added together when your claim is assessed.

HOW DO I QUALIFY FOR WORKING TAX CREDITS?

The WTC is complicated, but it comes down to how many hours a week you work and whether your income is ”low enough”. Depending on your income, you may qualify if you work at least 16 hours a week and are either responsible for a child or receiving disability benefits, or if you are over 50 and had been getting certain benefits for at least six months before you started work.

You may also qualify if you are 25 or more and you work 30 hours or more a week and are on a low income. Those over the age of 50 receiving benefits may be able to claim too.

HOW DO I CLAIM IF I LIVE WITH MY PARTNER BUT AM NOT MARRIED?

If you live together, you must make a joint claim. You claim both tax credits on the same form.

WHAT DO I NEED TO DO WITH MY RENEWAL FORMS?

Your renewal pack consists of an Annual Review notice, which provides details of the tax credits you received during the year and your personal circumstances.

If it’s correct you don’t need to do anything.

However, if you receive an Annual Review notice and an Annual Declaration, which asks you to provide details of your income for the tax year that started on April 6 2009 and ended on April 5 2010, you are required to return this by July 31, or your payments may be stopped.

WHAT IF MY CIRCUMSTANCES CHANGE?

If your circumstances change it can affect the amount of money you should be getting and you need to contact the Tax Credit Office.

Some changes need to be reported within one month, such as leaving your job, while for others you must notify the office within three months; for example, when you have a baby.

If you fail to tell the Tax Credit Office about a change straight away, they will not know until the next time you renew your tax credits, usually between April and July the following year. This could mean you have been overpaid; you may have to repay any excess and possibly a penalty of up to £300.

CAN I GET MY CLAIM BACKDATED?

You can normally get CTC and WTC backdated only for a maximum of 93 days before the date you apply. You do not have to explain why you did not claim earlier. You should clearly ask for backdated tax credit on your application form.

WHAT CHANGES TO TAX CREDITS WILL COME INTO EFFECT NEXT YEAR?

The Chancellor announced in his emergency Budget in June that CTCs would be withdrawn for families with a combined income of no more than £30,000, or possibly as low as £25,000 from April 2012. The baby element of the tax credit worth an additional £545 a year will also be abolished. While it is currently possible to backdate claims and certain changes of circumstances by three months, from April 2012 the backdating period will be one month only.

WHERE DO I GO FOR HELP?

If you need to report a change of circumstances or have any questions call the Tax Credit Helpline on 0845 300 3900, or textphone 0845 300 3909 if you have a hearing or speech impairment. Claiming tax credits can be complex, especially if your circumstances are not straightforward.

Tax Rebate

Can you really be sure you’re paying exactly the right amount of tax?

If you don’t know the answer to this question, then this article is for you. I’m going to explain how to check that deductions from your salary are as they should be, and how to claim a tax refund if they’re not.

Check your P60

If you have tax deducted from your earnings, or pension, through the PAYE (pay as you earn) system, you should receive a P60 from your employer, or pension company, every year. This document outlines your income and deductions for the tax year just ended.

If you have more than one source of employment, you should get a P60 from each employer. The same goes for people who have more than one pension.

You should always check your P60s thoroughly to make sure your tax code, and any tax which has been deducted, is correct. For example, if you’re under 65 and eligible for the basic tax-free personal allowance only, your code should be 647L this tax year (before the emergency budget).

This code is made up of the personal allowance divided by ten followed by the letter L. So, the code is 647L because the personal allowance is £6,475. But other tax codes may apply depending on your own circumstances. Visit the HMRC website to help you understand what your code should be.

Don’t underestimate how important this is. After all, HMRC admitted it had sent out thousands of incorrect codes earlier in the year, so it always pays to be vigilant.

Emergency codes

If your employer or pension company hasn’t been informed of your tax code by HMRC, they may have put you on what’s known as an emergency code, which could mean paying more tax than you need to. There are several reasons why an emergency code might apply. For example;

You have started a new job, but didn’t get a P45 from your previous employer.

You have started your first job after the beginning of the tax year, and you haven’t received any taxable state benefits, state pension or a company pension.

You have started a new job but you have had another job(s) or received taxable state benefits during the year.

Your tax code has changed during the year. This could happen if you started to receive company pension benefits or claim the state pension, for example.

You have started a new job but you were previously self-employed.
An emergency code usually ensures you receive the basic personal allowance, and therefore means you will earn some of your income tax-free. But it doesn’t make any provision for other reliefs or allowances you may qualify for. The emergency code is also 647L which is a bit confusing since it’s exactly the same as the code for taxpayers who are entitled to the basic personal allowance only.

That said, the 647L emergency code may also be followed by W1 (week 1) or M1 (month 1) which makes it easier to identify. This part of the code indicates that each week or month is being dealt with separately to give you an equal amount of net pay each time you receive your salary. But this doesn’t take account of any tax you might have paid earlier in the tax year, which could mean you’re paying too much.

If you think you’re paying emergency tax, check with your tax office and ask them to send you and your employer the correct tax coding. This will enable the right amount of tax to be deducted from your salary going forward. This will also give you the chance to claim any overpaid tax from HMRC.

How to claim a refund

Unless you pay your tax bill via self-assessment, there isn’t a specific form you can use to claim a refund if you think you have paid too much tax on your earnings or pension income. That said, if you find you have paid tax on your savings interest even though you’re a non taxpayer, you can reclaim it using form R40. (To ensure you receive gross interest from now on, send form R85 to all the banks and/or building societies you have savings accounts with.)

For a PAYE tax refund, you’ll need to contact HMRC in writing. It’s a good idea to mark your letter with ‘Repayment Claim’ so it can be prioritised.

Your claim should include the following information:

• Your personal details including your name, address, national insurance number and your PAYE reference shown on your pay slips.
• A rundown of your employment history including each of your PAYE reference numbers for different employers (if applicable), the dates when you were employed, your earnings, and the total amount of tax deducted.
• Explain why you think you’re entitled to a refund.
• Enclose copies of your P60s and P45s.
• Provide your bank details. If your refund can be transferred to your bank account it may speed the process up.
• Don’t forget to sign and date your letter.
• Keep a copy of your letter and arrange for proof of posting from the Post office.

In theory, your claim should be resolved within four weeks, but delays can occur particularly if security checks are required before a repayment can be granted. Be prepared to chase HMRC up if necessary. Keep a log of any calls you make to them including the date and time you called and the name of the person you spoke to, plus a summary of the conversation along with any advice you were given by the tax officer. This may come in handy if there’s a dispute over your claim further down the line.

Be aware of the time limits

Finally, you should know that the time limit for reclaiming overpaid tax is due to be cut from from almost six years to just four in 2012. However, for self-assessment taxpayers, the reduction has already taken place. So make sure you don’t miss the opportunity to get your tax back

Council Tax Arrears

What to do if you get behind with payments?

If you have council tax arrears, you will need to contact your local council andmake an arrangement to repay them. You will normally be expected to clear your arrears within the current financial year, which ends on 31 March. If you can’t afford this, work out what you can afford and tell the council.

You may beable to arrange a longer repayment period if you are on a low income or havespecial circumstances, for example, if you have a short term drop in yourincome due to illness. You will need to pay an amount off the arrears on top ofyour usual monthly council tax payment.

Check your council tax bill is right

Depending on your situation, you may be entitled to a discount or reductionin your council tax bill. If you live alone or are the only person responsible forthe council tax, you should get a discount.

You may be able to claim Second Adult Rebate if you have to pay counciltax and you live with someone else, other than your partner. The other personmust be 18 or over, not paying rent, not responsible to pay council tax, andhave income below a certain amount. If your own income is below a certainlevel, you may be entitled to Council Tax Benefit instead. When you claim,the council should work out which benefit will give you the most help with yourcouncil tax. You can get a claim form for Council Tax Benefit and SecondAdult Rebate from your council.

If you, or someone living with you, has a disability, you may be able to gethelp to reduce your council tax bill bill.

If you are a full-time carer or someone in your home has severe mentalimpairment, you may get a discount. Severe mental impairment can includethings like Alzheimer’s disease and serious learning disabilities.

If your home has been adapted for a person with a disability, you may be ableto get a disability reduction. The person with the disability can be anyoneliving in your home. It doesn’t have to be the person paying the council tax.

Ask your council for an application form for a discount for a carer or personwith severe mental impairment, or a disability reduction. You can ask for all ofthese if they apply to your situation.

What happens if you don’t pay

If you fail to pay off your council tax arrears, or to reach an agreement with thecouncil, your council can apply to the local magistrates’ court for a liabilityorder. This is a court order which says that you must pay the whole amount ofcouncil tax owed for that year, not just the arrears. The liability order allowsthe council to take action against you to make you pay.

If you owe the council tax jointly with someone else, the council can still askyou to pay the whole amount back.

You will be sent a summons. This is a court document telling you how muchthe council says you owe and the date and time of the hearing where thecourt will consider whether to make the liability order. The council can addcosts to the amount you owe to pay for the liability order.

You should contact the council and try to make arrangements to pay off thedebt before the hearing. You won’t be able to do this at the hearing itself. Thecouncil might agree to let you pay off the debt in instalments, if you can’tafford to pay it all straight away. If you do make an agreement to pay, thecouncil may be willing to cancel the summons or to cancel (waive) the courtcosts, provided you keep to the arrangement.

If you don’t agree you owe the council tax, for example because you’ve beencharged for a period when you no longer lived at that address, tell the councilstraight away. If they agree, they can stop the court action. If they don’t agreeor you can’t contact the council, you will need to go to the court hearing at thetime shown on the summons.

What happens at the liability order hearing

At the liability order hearing, the magistrates will decide whether you are theperson responsible for paying the council tax and make a liability order.

If you agree that you are responsible for paying the council tax, you don’tneed to go to the hearing.

If you don’t agree that you’re responsible, you should go to the hearing and tryand prove this to the court. You will need to bring proof with you, for examplea bill showing your name and real address. If the magistrates agree that youdon’t owe the council tax, they will not make a liability order.

If a liability order, is made, the council can:

• ask the Department for Work and Pensions (DWP) to makedeductions from your benefit, or
• instruct your employer to make deductions from your wages(attachment of earnings order), or
• send bailiffs to your home to seize your belongings. In somecircumstances, bailiffs can use reasonable force to get into your homeand seize goods, or
• make you bankrupt (if you owe £750 or more), or
• apply for a charging order (if you owe £1000 or more). A charging order gives the council powers to force you to sell your property andpay off the council tax debt out of any money left after the mortgagehas been repaid. This doesn’t happen very often. Get advice if it happens to you.

If none of these things have worked, the council can apply to the magistrates’court for a warrant to send you to prison (a committal warrant). The council will do this if it believes you’ve got the money to pay but are deliberately with holding it, or aren’t making an effort to pay.

You will be sent another summons, called a committal summons. This time,you should go to the court hearing. If you don’t, you could be arrested. If you can’t attend the court hearing for any reason, contact the council and arrange another time for the hearing. Try to come to an arrangement with the council that you can afford beforehand, if you can. The council can add further costs to your debt, to pay for the court summons and hearing.

What happens at the committal hearing

At the committal hearing, the magistrates must look in detail at your financialsituation to see if you can pay. This is called a means enquiry. Tell themagistrates about any special reasons why you haven’t been able to pay, forexample, a drop in your income or changes within your family. This will helpthem to decide what order to make. If you are in financial hardship or cannot pay for other reasons, you can ask the magistrates to write off (remit) all or part of the debt.

If the council can show you have refused or not made an effort to pay, the magistrates could send you to prison. Usually though, they will make an orderpostponing the warrant to send you to prison, as long as you pay off the debtby regular instalments.

You can ask someone to go with you to the court hearing if you need help toexplain your situation. The court doesn’t have to let the other person speak onyour behalf, unless they are a solicitor. You may qualify for help to pay for asolicitor under Legal Aid, or the court may have a duty solicitor you can speak to when you get there.

After the committal order has been made

After the committal hearing, make sure you understand what you must payand when the payments are due. If you are not sure, ask the council officer to explain. You must stick to the payments until all the money is paid off. If yourcircumstances change or you are unable to pay for any reason, contact thecouncil straight away and make another arrangement. Otherwise, they mayhave you arrested and brought back to the court to say why you haven’t paid.

Tax Investigation Tips

But there are things you can do to make the process quicker and hopefully easier.

Although everyone’s situation can vary drastically, here’s This a few top tips on what to do (and indeed, what not to) if you are being investigated by HMRC.

1. Don’t panic!

Just because you are being investigated, it does not mean it will necessarily be the end of the world. Even if you have been careless, remember very few cases actually end in a custodial sentence.

2. Get advice

If you are being investigated by HMRC, it is highly recommended that you seek out independent financial advice from a reputable accountant or adviser. It’s likely to be cheaper, not to mention easier, in the long run.

3. Keep it quiet

Don’t discuss your tax affairs with anyone but a tight circle of tax advisers. Your best friend’s advice and thoughts on the matter may not be what you need and they are more than likely going to get it wrong.

And when you settle with the taxman, don’t go bragging about it – boasting about what a great deal you got can be a very bad idea. Fiona Fernie, at accountancy firm BDO Stoy Hayward, points out: ‘You never know who is listening, things can, and do, get back to the taxman, and the case against you could even be re-opened.’

4. Tell the truth

Don’t, under any circumstances, lie to HMRC. In the long run it’ll do you no favours.

5. Don’t underestimate the taxman

Don’t assume HMRC is ignorant of anything. It will amaze you the level of resources that the taxman has at his disposal.

6. Be prepared

Be well prepared for any meetings, you need to be aware of what you might/will be asked, so have enough prepared to be able to give adequate answers.

7. Pay up ASAP

Make significant payments on account. In other words, if you are fairly confident on what settlement you need to make – then pay up as soon as you can. Not only does it show co-operation but it could also potentially save you a small fortune in interest, which can accrue on a daily basis. But don’t massively overpay either, as it could be a drawn-out process getting your cash back.

8. Don’t destroy evidence

Don’t try to destroy evidence. If you don’t have the paperwork, HMRC may assume you are trying to hide significantly more than you actually are. As a result it may treat your case even more seriously and the process could be prolongued. HMRC can invetsigate back as far as 20 years if it thinks your case warrants such examination.

9. Tell the whole story

Do not suffer from selective amnesia – don’t tell half the story and wait for HMRC to catch up. In very serious cases, false or deliberately misleading statements can result in prosecution.

10. Don’t reoffend

Once you’ve settled, save yourself time and money and don’t re-offend again. HMRC could, and most likely, will be harsher on a re-offender.

Buy To Let Tax Guides

Income tax

Rent will be treated as income and taxed in line with your basic or higher-rate tax bands.

You will, however, be able to offset mortgage interest payments, letting agency costs and maintenance expenses against the taxable rental income.

This makes it more tax-efficient to have a mortgage on your investment property rather than your main home where you can no longer get tax relief on your mortgage.

Rental income should be declared on an annual self-assessment tax return, it may be worth seeking an accountant to ensure all tax breaks are taken advantage of.

Tax on the price rise

Capital gains tax kicks in when you sell a buy-to-let property at a profit.

In April 2008, capital gains tax was changed to a flat rate of 18%. Any gains above the annaul £10,100 (2009/20) personal threshold will attract CGT.

Previously CGT as charged at up to 40% and taper relief cut this, if a property had been owned for more than three years. This no longer applies.

Capital gains tax applies to any property which is not your main home, known as the Principal Private Residence. If you only have one property and it is considered your PPR, then you do not have to pay CGT, however, the taxman may want evidence that you were actually living there.

Capital gains tax liabilities should be declared annually on your tax return and anyone making a substantial sum from selling a property should seek out a good accountant, who can take advantage of all available breaks.

Stamp duty

Stamp duty is payable on buy-to-let properties by the purchaser, as all other residential properties. The current rates are 1% above £125,000, 3% above £250,000 and 4% above £500,000. A stamp duty holiday currently applies until the end of the year on all properties under £175,000.

Avoiding tax

Many people think that one way to dodge tax – and are often advised by accountants – is to put a second home in the name of their partner. When they come to sell, they claim their partner has been living in the property thereby making it exempt from CGT.

This option is easier for people who have done let-to-buy: they keep the mortgage on the first home which they lived in – and then take a second traditional mortgage with another lender on an additional home where they live.

This bypasses the need for a proper buy-to-let mortgage on the first property, which would alert the taxman. However, it breaches the lender’s rules, which means they could call in the loan without notice. More importantly, evading CGT in this way would be treated as illegal and result in fines or even imprisonment.

There are more complicated ways of mitigating tax on buy-to-let, including setting up a company to own the properties. For the average amateur investor this is not worthwhile as it is expensive, complicated and can limit access to mortgage finance.

Cutting capital gains tax

Buy-to-let owners and those with second homes can slash tax bills if they have ever lived there as their principal private residence and through lettings relief

Everyone’s main home – or principal private residence as the taxman catchily names it – is exempt from capital gains tax when sold, but any other properties they own attract CGT at their highest rate when sold.

An unmarried couple may each own a home that qualifies as their principal residence but a married couple may only nominate one property and must elect jointly.

It is possible to cut capital gains bills by living in the second property for a period of time. Special rules apply to properties that have been a main residence. The period when it was the main residence is exempt, plus the last 36 months of ownership.

For those who have previously rented out their main residences there is the added benefit of being able to claim up to £40,000 letting relief. This is available to anyone with a share in the property – giving a couple, even if married, up to £80,000 between them.

The amount of private letting relief that can be claimed cannot be greater than £40,000 and must be the lower of that sum, the amount of principal private residence relief being claimed, or the capital gains made during the letting period.

Moving Abroad Tax

If you decide to sell your house in the UK before you move you won’t be liable to pay capital gains tax (CGT) on the proceeds because the sale of a private residence is exempt.

If you keep your home in the UK after you have moved abroad and rent it out any rental income will be liable for tax if it amounts to more than £4,250 in one tax year. However, your letting agent or your tenants are responsible for making sure the tax is paid.

Further advice

For more information about the Inland Revenue’s tax rules for ex-pats go to the Revenue website: International Series Leaflets.

If you are liable to fill out a self-assessment tax form you can download it from the IR site: Tax Return.

The Inland Revenue has a centre for non-residents, call it on 0845 070 0040 if you have any income tax queries. It also publishes a range of guides including IR138 Living or retiring abroad and IR20 Residents and non-residents. These can be ordered over the phone or downloaded at the IR website.

You must also remember not to forget to tell the Inland Revenue when you go abroad. You will usually be asked to complete a P85 tax form, which allows the authorities to keep track of you.

Those heading overseas should complete a tax return for the portion of any tax year from 6 April to their date of departure, which will stop the Revenue chasing them for unpaid tax or outstanding information.

However, those transferred overseas by a British employer may find themselves partly insulated from the impact of a new tax regime.

Inheritance Tax Guide

As a result of soaring property prices many individuals and couples will find that they have been pushed over the current thereshold. For those with concerns tax planning is essential.

The threshold

You only have to begin paying IHT at a certain point, the rate of which is a hefty 40%.

For the tax year 2008-2009 it was £312,000, in 2009-2010 is £325,000 (£650,000 for couples).

But in 2010-2011, the threshold was meant to rise yet again to £350,000, and £700,000 for couples.

However in his 2009 pre-Budget Report, chancellor Alistair Darling, announced he would be freezing the threshold at £325,000 for individuals and at £700,000 for couples until 2011 in order to help tackle the nation’s eye-watering deficit.

If the value of your estate, including your home and certain gifts made in the previous seven years, exceed the threshold, tax will be due on the balance at 40%.

Inheritance inclusions

A person’s estate includes everything owned in their name; the share of anything owned jointly; gifts from which they keep back some benefit, such as a home given to a son or daughter but still lived in by the parent; assets held in some trusts from which they receive an income.

Against this total value is set everything that the deceased person owed, such as, any outstanding mortgages or loans, unpaid bills, and costs incurred during their lifetime for which bills have not been received, as well as funeral expenses.

Avoiding IHT

Any amount of money given away outright to an individual is not counted for tax if the person making the gift survives for seven years. These gifts are called ‘potentially exempt transfers’ and are useful for tax planning.

Money put into a ‘bare’ trust – a trust where the beneficiary is entitled to the trust fund at age 18, counts as a potentially exempt transfer, so it is possible to put money into a trust to stop grandchildren, for example, having access to it until they are older.

However gifts to most other types of trust will be treated as chargeable lifetime transfers. Chargeable lifetime transfers up to the threshold suffer no tax but amounts over are taxed at 20% with a further 20% payable if the person making the gift dies within seven years.

Gifts that are exempt

Some cash gifts are exempt from tax regardless of the seven-year rule. They include: wedding gifts of up to £5,000 to each of your children; wedding gifts of £2,500 to each grandchild, and wedding gifts of £1,000 to anyone else; other gifts of up to £3,000 a year (plus any unused balance of £3,000 from the previous tax year); gifts of up to £250 each to any number of people each year; gifts to charities, the National Trust, national museums, the main political parties and most registered housing associations.

Regular gifts from after-tax income, such as a monthly payment to a family member, are also exempt as long as the giver still has sufficient income to maintain their standard of living.

Any gifts between husbands and wives are exempt from IHT whether they were made while they were both still living or left to the surviving spouse on the death of the first. Tax will be due eventually when the surviving spouse dies if the value of their estate is more than the combined tax threshold, currently £624,000.

Death within the seven-year period

If gifts are made that affect liability to IHT and the giver dies less than seven years later, a special relief known as taper relief may be available. The relief reduces the amount of tax payable on a gift. (See table below)

When the tax must be paid

In most cases, IHT must be paid within six months from the end of the month in which the death occurs. If not, interest is charged on the unpaid amount. Tax on some assets, including land and buildings, can be deferred and paid in instalments over 10 years.

Though if the asset is sold before all the instalments have been paid the outstanding amount must be paid. The IHT threshold in force at the time of death is used to calculate how much tax should be paid.

Tax Free Charity Donations

While popping a few pounds in a donation box from time to time is welcomed by charities, they will gain more from your gift if you donate through a designated scheme, such as payroll giving or Gift Aid.

Give As You Earn

If you are an employee ‘Give as You Earn’ is the most tax effective way to make regular donations. Under the scheme, you make a donation tax-free from your gross salary to any cause of your choice. This means that if you’re a basic-rate taxpayer pledging say £10 a month, it will only cost you £7.80.

Besides donating from your gross pay, there are also other ways of donating money to charity via the Give As You Earn scheme.

You can set up a Charities Aid Foundation account, where you agree to pay a minimum of £10 from your pay each month into your own account. The CAF will give you a special ‘charity chequebook’ and charity card to make tax-free donations whenever you want.

You can use the cheques to make secure donations over the internet and they can also be used for collecting tins in the street.

If you’d like to organise a staff charity fund at work, you can sort this out by joining together with colleagues to set up a joint fund for your Give As You Earn contributions and can then specify which causes you all want to support.

If you want to set up a scheme for making large donations, you could put your Give As You Earn contributions towards a CAF Charitable Trust. For most people, the easiest way to join the Give As You Earn scheme is to do so directly through their employer.

Company schemes

Ask your payroll manager if your company has a scheme in place. Even if it hasn’t, they are very easy and inexpensive to set up. Alternatively you can find out whether your employer is registered from the CAF website (see below) or call the helpline on 01732 520 055.

Gift Aid

If you’re self-employed or want to make a one-off donation or react to an appeal, Gift Aid is the best choice. It allows a charity to reclaim the basic-rate tax on donations made by UK taxpayers from the Inland Revenue. In addition, higher rate taxpayers can claim 18% tax relief on the gross amount of the donation, meaning that the donation costs them less.

You can make charitable donations by either or both methods – Gift Aid and Give As You Earn, but you can only claim tax relief once on each type of gift.

There are no longer any restrictions on charitable giving.

You must make a declaration to the charity that you want your donation to be treated as Gift Aid so that they can claim the tax back.

You can do this over the phone, but usually the charity will send you a form to sign. One declaration can be used to qualify as many gifts as you want or for whatever period you wish. Payments are then made direct to the organisations by cheque, direct debit, standing order or credit card. Donations can be made of any size and either on a regular basis or as a one-off gift.

Qualifying for Gift Aid

For your gift to qualify, you must pay at least as much tax as the amount the charities will reclaim on your gifts in the tax year in which you make them. The tax year runs from 6 April to 5 April the following year.

You must not receive excessive benefits in return for your gift. Further details are outlined in the Inland Revenue’s leaflet on charity donations.

Withdrawing a declaration

If you discover you will not pay enough tax to cover the tax claimed by the charity – then your gift should not be a Gift Aid. You have 30 days from the date of the written record to withdraw it. If you wish to stop your donations for any other reason you can cancel your declaration at any time.

Stocks and shares donations

You can also give shares and other UK registered assets to charity and claim tax relief. By signing the certificates over to a charity, you will not be liable for capital gains tax on the difference between the price you bought them at and their value when you make your donation.

You can also claim back other fees, such as costs involved in the transfer or stamp duty. You can also offset the value of the shares against your income tax on your self-assessment tax form.

ShareGift, the charity share donation scheme run by The Orr Mackintosh Foundation, accepts small holdings of shares, which would otherwise be uneconomical to sell and donates the sales proceeds to charity.

Property donations

All donations of land or property to charity get full income tax relief. For example, if you are a higher rate taxpayer and you give a property worth £100,000 to charity, you can knock £40,000 off your income tax bill.

It is worth noting that gifts made to UK charities are completely free of inheritance tax. Not only that, donors of assets, land or shares to UK charities are not liable to capital gains tax, even if the asset is worth more when you donate it than when you acquired it.

Other Government changes

Since April 2003, higher-rate taxpayers can claim tax relief on charitable donations made through Gift Aid as soon as they complete a self-assessment tax return. Previously you had to wait for the following year’s tax return.

Also, you can instruct the Inland Revenue, by way of a tick box on the tax return, to send all or some of any tax rebate direct to the charity of your choice.

Charity credit cards

Many banks have credit cards linked to charitable organisations. When you first take out the card, a one-off donation is made to the charity.

The most generous cards include RSPCA’s Standard and Platinum cards, which give £40, and Rotary International and Platinum Plus cards which give £25, at the outset.

Giving online

Girobank’s CharityPay is an online service which allows anyone with a debit or credit card to make a donation, so it is not necessary to have an online bank account.

The whole process takes just seconds and can be done 24 hours a day. Among the many benefits of CharityPay is groups can receive donations without having to set up their own costly online payment systems.

Council Tax Payment Guide

The Basics

All properties that could be considered a dwelling are liable for council tax. This includes houses, flats, maisonettes and bungalows. Owners of mobile homes and houseboats will also have to pay council tax if it is their main home.

The Cost

The charge is based on the value of your home. Every household will fall into one of eight bands, running from A to H.

Properties in England and in band A, for example, are worth under £40,000, while properties in England and in the highest band of H are valued at more than £320,000.

The amount of council tax you pay will vary widely depending on which borough of the UK you live in, as each council sets its own council tax.

The History

Whichever way you look at it, council tax is an increasing burden for home owners. In the past decade it has more than doubled, adding hundreds of pounds to annual bills.

Exemptions

Only households with two or more adults have to pay the full council tax. If you live alone, or you are the only adult resident, then you should claim a 25% discount on your bill.

Student households do not have to pay council tax. But, if you are a student living with a non-student, the household will qualify only for a 25% discount on the council tax bill.

To get the discount you need to send a student registration certificate to the Department of Finance, P.O Box 60, 2 Great George Street, Leeds, LS2 8JR.

If you don’t file a certificate you may end up being sent a bill. You should be able to pick up a certificate from the student office at your university.

Households with students and more than one person in full-time employment must pay the full council tax.

You may also register for a discount if there is a full-time carer in the household, or someone with severe mental illness. If work has been carried out on the house, say a new bathroom or kitchen has been added because someone living there needs extra space because of a disability, you may also be eligible for a rebate on your council tax bill.

Pensioners

If you live alone, are disabled or on a low income you might be able to claim a discount. However, the onus is on pensioners to let their local council know about their situation and find out if they are eligible.

Many pensioners are eligible for Council Tax Benefit. The benefit is means-tested and the exact amount on offer depends on your age, income, any savings you may have, and the council tax band your home falls into.

The maximum Council Tax Benefit is 100% so those that have a very low income may pay no council tax at all.

Be aware that if you have more than £16,000 in savings then generally you won’t be eligible to claim the Council Tax Benefit. However, if your income is below £105 a week as a single pensioner (£160 for couples)you are still elligible for Council Tax Benefit, even if you have savings of more than £16,000.

You can get all your council tax paid if your income is less than £121 a week if you are single and aged 65 or more.

Second Homes

If you own a second home you should expect to pay 90% of the council tax where it is situated, regardless of how much you use the property.

Self Assessment Tax Return Form Tips

Who completes a tax return?

Anyone whose income is not taxed automatically via the Pay As You Earn system (PAYE) needs to declare their taxable income. You should get a tax form if you are self-employed, a partner in a business, a company director or trustee, or have complex tax affairs. You could also get a form if you just have savings in something like the National Savings Pensioners Bond. The interest from this is taxable, but is paid without tax deducted.

You are a likely candidates for self-assessment if…

1. You work for yourself – that is, you are self-employed, or in partnership

2. You are a company director

3. You are a Name or Member of Lloyd’s insurance market

4. You are a Minister of Religion (of any faith or denomination)

5. You have income from letting any property or land you own (but if you are an employee and this income is less than £2,500 a year a tax return may not be necessary)

6. if you receive other untaxed income and the tax due on it cannot be collected through a PAYE tax code

7. If you receive annually (or can be treated as receiving) income from a trust or settlement, or any income from the estate of a deceased person, and further tax is due on that income

8.if you have taxable foreign income, even if you are claiming that you are not normally resident in the UK (and including non-resident landlords)

Additionally, if you are an employee or pensioner the Revenue will need a tax return if…

9. you have annual income from savings or investments of £10,000 or more (before tax) have annual income of £100,000 or more have tax due at the year end that cannot be collected through your PAYE tax code for the following year

10. have untaxed income of £2,500 or more (but some pensioners may be able to pay the tax on this through their PAYE coding)

11. have annual claims against tax for expenses or professional subscriptions of £2,500 or more

12. are 65 and over and entitled to some age-related personal or married couple’s allowance but not the full amount (unless you have very straightforward affairs).

You will also need to fill in a form for capital gains tax if you…

13. have sold or given away chargeable assets worth more than four times the annual exempt amount. For 2009/10 the annual exempt amount is £10,100 so that is £40,400

14. deduct losses, but your gains before any losses or taper relief are more than the annual exempt amount, or do not deduct losses but your gains after taper relief are more than the annual exempt amount

15. or want to claim an allowable capital loss, or make any other capital gains claim or election for the year

Paying Tax

If you are self-employed, you pay your tax in three stages. A first payment on account by 31 January during the tax year. This is normally half your previous year’s tax bill. A second payment on account – which is the same amount as the first instalment – by 31 July after the end of the tax year. A final balancing payment (or you get a repayment) by the next 31 January – this is the bill calculated on the actual income returned for the tax year less the payments you have made on account.

The Tax Return

Everyone sent a tax form gets the basic eight-page return. But there are also a number of supplementary pages that you will get only if the Revenue knows you need them. You will have to ask for any that are missing. Check whether you have all the supplementary pages you need well before the deadline for sending in the form.

Deadlines

The tax year runs from 6 April to 5 April the following year. The deadline for paying the tax you owe for that year is the following 31 January. If you are filing your return on paper and want the Revenue to work out how much tax you owe, you must return your form by 31 October. If you return your tax form after 31 October, but before 30 December, the taxman will still work out what you owe, but cannot guarantee to tell you before the 31 January payment deadline.

If you choose to fill out your return online, the tax you owe is calculated automatically. To complete your return by this method, go to the Revenue and Customs website and click on the Self-Assessment button. Once you decide to submit your tax return online you will be sent by mail a security code that will enable you to go ahead. You should leave yourself at least two weeks before the final deadline for this code to arrive.

You must return your tax form by 31 January at the latest. If you ignore it, you will be liable to pay a £100 penalty for a late return.

Income From Investments

If you don’t normally get a tax return, you must tell your tax office about income or capital gains that are not taxed at source. You must do this within six months of the tax year in which you get the money. You don’t have to fill in a tax return if your gains are exempt or come to less than the capital gains tax-free allowance, set at £10,100 for 2009/2010.

Paperwork

You will need the following documents to fill in your return: a P60 from your employer detailing income from your job and the tax you have paid on it, a P45 if you have left your job, a P11D or P9D detailing benefits and expenses; a P2 form giving notice of coding. You will also need details of interest on bank or building society accounts, dividends from shareholdings, unit trusts or investment trusts, and any other income you get.

Mistakes

Chartered accountants warn that the Revenue takes a tough line on carelessness and non-compliance. Taxpayers could even face prosecution if they are negligent.

For those taxpayers who still have to file their return the message is simple – give yourself enough time and get it right first time. To avoid the most common mistakes, follow these easy steps:

1. Before you start, make sure the Revenue has sent you everything you need. The form has several sections and the Revenue will only send those that it thinks apply to you. Check if you need extra pages to give details of other sources of income. You can also order more pages by calling 0845 9000 404.

2. Keep accurate records. If you face a Revenue inquiry you will have to produce evidence that your tax return is correct. Around one in 20 returns are liable to be subject to further investigation.

3. Dig out everything you need. If you’re self-employed you will need details of your earnings and expenses. You will also need other sources of information such as bank statements and share dividend statements. Self-employed people must have invoices or payment slips from clients and company employees will need P60 forms.

4. Don’t throw your records away. Taxpayers must keep records for at least a year after filing. Self-employed or business owners must keep records for six years.

5. Don’t leave things until the last minute. Once you have gathered all the necessary paperwork, put aside a large part of the day to go through the forms. The biggest mistake most people make is forgetting to sign the form before sending it off.

6. If your affairs are complicated, seek advice. Tax specialists and accountants can help with all or part of your return. Taxaid is a charity that gives free, professional advice if you can’t afford to pay for an accountant. It can be contacted by phone on 020 7803 4959 between 10am and noon, Mondays to Thursdays. However, be aware, that there is big demand for its services. The Revenue also runs a special self-assessment helpline on 0845 9000 444 from 8am until 10pm.

7. As well as paying tax you owe for the last tax year, you might also need to make a payment on account for the current tax year. This is calculated on the basis of your previous year’s earnings. In most cases you work this out by halving your liability for the last tax year. You pay half of what you owe on account in January and half in July.