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LITRG’s reminder article this month covers looking at your tax affairs for last year and getting your tax credits renewal out of the way well before the deadline.
 

Introduction

Tax, tax credits and benefits often interlink, as LITRG has demonstrated on numerous occasions. For this reason, you should always look at your overall circumstances. Here LITRG brings together a series of topical reminders, highlighting issues to consider if you:

1. might be due a tax refund
2. are a student working in the summer vacation
3. are a Self Assessment taxpayer who needs to plan ahead to make a payment on account on 31 July
4. make Gift Aid donations which you might need to review
5. are an existing or potential tax credits claimant

1. Might you be due a tax refund?

There are various reasons why you might have paid too much tax in the past. Some examples can be found on the LITRG website under Students – Tax refunds and Pensioners – Claiming a repayment.

If you have to fill in a Self Assessment tax return, in most cases you will need to fill in the return to receive any repayment you might be due. There are exceptions to this, however. For example, you can claim a tax refund before the end of the tax year if you stop work for a period of time and complete a form P50, or cash in a small pension and complete form P53.

2. Are you a student working in the summer vacation?

If you are a student working only in holiday time and think you will earn less than your personal allowance over the whole tax year (£7,475 for 2011/12), you can ask your employer if you can complete a form P38(S) which allows you to be paid without tax being taken off your wages. Remember, though, that National Insurance contributions may still be deducted depending on your weekly or monthly income.

3. In Self Assessment? Plan ahead for your 31 July tax payment

If you complete Self Assessment tax returns, 31 July is also the deadline for the second payment on account for 2010/11, if one is due.

If you think you will not be able to pay and cannot claim to reduce your payment, HMRC should respond sympathetically if you apply for time to pay before 31 July. They are more lenient to those who ask for more time beforehand, than to those who miss the payment date and only then ask for time to pay.

4. Gift Aid donations – time for a review?

If you make payments to charities or Community Amateur Sports Clubs under the Gift Aid scheme, remember to keep records of how much you pay and when. This information will be needed if you complete a tax return or repayment claim.

To use the Gift Aid scheme, you need to pay at least as much tax during the tax year in question to cover the amount of tax on the gift. So if you make regular Gift Aid payments, for example by standing order, you might want to keep a watchful eye on them, particularly if your circumstances change so that you no longer pay tax. If you are a non-taxpayer or only pay at the rate of 10% on savings, HMRC could ask you to pay over the balance of the tax on your Gift Aid donation. Alternatively you could find your tax repayment is reduced if you have made Gift Aid payments. This can be a particular concern for pensioners.

In the past, LITRG has been assured by Ministers that if a non-taxpayer mistakenly used the Gift Aid system to make a donation, HMRC would try to recover the tax on the gift from the charity rather than from the donor. But one cannot rely on that assurance being followed in every case.

5. Tax credits

It is important to consider tax credits if you have not already thought about them since the new tax year began on 6 April.

Existing claimants need to renew their claim by 31 July, but the earlier this is done, the better. As well as acting as a new claim for 2011/12, the renewals process also finalises your award for last year (to 5 April 2011).

If you don’t currently claim tax credits, you should still consider your position. For example, you might now be entitled to them, particularly if your personal or financial circumstances have changed. Or even if they haven’t changed yet, you might consider claiming tax credits now in case your income drops during the coming year.

More information can be found in LITRG’s article – ‘Tax credits and the new tax year – changes and renewals’.

Useful links

Form P50 on the HMRC website
More about cashing in small pensions (trivial commutation) on the LITRG website
Guidance for students working only in vacation time on the LITRG website
Guidance on Self Assessment payments on account on the LITRG website
HMRC guidance on what to do if you can’t pay your tax
More about Gift Aid on the LITRG website