Yes, I have finally done it. I spent Saturday night completing the annual headache that is my personal tax return. What a waste of two hours of my life!
I complete tax returns every day and have done, for over 20 years. It explains the greying temples, but I find the actual completion process relatively straightforward.
The problem I have and I assume it is the same for many others, based on the number of tax returns returned to the Revenue in January, is actually putting your hands on the information needed to prepare the return.
This year’s completion resulted in only one accusing finger pointed at my poor wife Sarah and a short period of raised voices.
“I want to complete my tax return. Where are our bank statements? I need details of interest?” I demanded in an accusing tone, indicating that I am never that impressed with her foolproof filing system. “Open your eyes and look in the filing cabinet under bank statements,” came back the irritated reply as she carried on with her computer game.
She was right, albeit they were hiding behind some misfiled credit card statements.
Armed with this information, I found out that our annual joint interest was the princely sum of £150 between us. My share being half of this. Entering the amount on the return, it did dawn on me to ask why this money was not held within a Cash ISA?
I am giving myself a headache and putting strains on my marriage locating this information and paying tax for the privilege. I will owe extra tax on this money as I pay tax at 40%.
Time for smug comment from Sarah reminding me that she does have an ISA and she has contributed the maximum amount for the last couple of tax years. Why had I not done the same? I could have opened an easy access account if I needed the money back for any reason. Funding a divorce was my immediate thought.
The tip being that having an ISA would make me better off and make my life easier. The interest on an ISA is not included on the tax return as it is tax free.
I then spent the next ten minutes working out the personal pension contributions I had made in the year. These amounts will reduce my tax bill and this is good news but, again, I could have made my life easier. If Kirkpatrick and Hopes had contributed for me and I had ‘sacrificed’ part of my salary, I would obtain automatic higher rate tax relief. This would give me a small cash flow advantage and save me time sorting out these details.
The next 20 minutes were spent completing the one part of the form that makes me happy. I entered down all the small regular gifts I make to charity. I use Gift Aid and this means that the charity can claim further amounts from the Revenue.
This increases the benefit of my contribution to the charity by 25%. So if asked to sign a Gift Aid form I always say yes. The good news does not stop there, as entering the details on the form means that I benefit from higher rate tax relief.
Signing the simple elections and keeping records of the contributions made has saved me £125 in tax. I make a mental note to put this money aside to help part-fund a weekend break to try to make things up with Sarah.
Like many directors, a proportion of my ‘salary package’ is paid in the form of dividends. If I was a basic rate taxpayer, I would owe no tax on these amounts but, as a higher rate taxpayer, I do owe extra tax.
Having entered all my income details on the form, I can now just press a button on my tax programme and it tells me I owe tax of about £1,700.
My stomach sinks and I consider a quick intake of alcohol to help ease the pain. I think of the grief and pain caused by telling Sarah that her Christmas present money is going to another darling this year. A guy called Alistair.
I then remember that provided I send the form electronically to the tax office and before the 30 December I can ask the Revenue to collect the tax due by adjusting my 2010/11 tax code. Panic over, marriage still intact, time to open a bottle to celebrate. I make sure that I complete the section of the form and press another button sending the form to the Revenue. Job done.
There is a postscript to this story: the headache of the form is completed but I think a new one is just starting. I am not sure that the coding out of the underpayment will be that simple.
On a check of the Revenue website, it still shows the tax outstanding. No mention is made of the tax being collected by adjusting my future tax code. This happened to me last year.
A quick call to the Revenue call centre confirms to me that the tax is being collected in my coding. I say thank you but remember that last year it still took three phone calls to achieve the desired outcome. I think I am not alone with this problem.
The point here is that having prepared the return well before the payment date, there is time to resolve any problems. It would not be quite so easy if I had left the preparation of the return until late January.