Please feel free to get in touch

Point of View Archive

31st January deadline - time to declare the profit from your investments 


This week, Google struck a deal with HM Revenue and Customs to pay a one off lump sum of £130m to write off the past ten years of tax money owed. Whilst Google may be able to enter favourable deals with HMRC, most of us are not so fortunate; and for those with taxable income to declare, this means completing an online Self-Assessment tax return by the 31st January (paper returns have to be submitted by 31 October following the end of the relevant tax year).
 
For investors, this means declaring the income which has been generated from savings and investments (apart from money which is held in tax efficient vehicles such as ISAs). It also means disclosing the rental income from buy-to-let property, and one-off capital gains made from the disposal of assets such as shares, or a property which isn’t your primary residence or land. Income from company dividends, bank account interest and income from a trust or settlement, plus any taxable benefits need to be included. If you are self-employed, or if you have earned an income for work alongside your primary job or pension income, you also have to declare it, be they UK or foreign earnings.
 
Payments into personal pension schemes (which are not set up by your employer) also need to be declared. There are caps on how much you can contribute into a pension scheme efficiently, but more positively, some pension contributions can reduce your taxable income.
 
There are other silver linings to the Self-Assessment tax cloud. Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTS) are both investments which give backing to small companies and, as such, they qualify for income tax rate relief at a rate of 30 per cent. Other relief comes in the shape of gifts made to charities, which also need to be declared on your Self-Assessment tax return. Higher rate tax relief on Gift Aid donations allows those who pay income tax at 40 per cent or above to claim the difference between the higher and basic rate on their gifts. To put this into context, a donation of £100 (which is worth £125 to the charity with Gift Aid) also qualifies the donor to a tax rebate of £25.
 
If you are currently receiving child benefit and you earned more than £50,000 in 2014/15 then you will have to repay some of the money received using your Self-Assessment tax return. For couples, if one income exceeds £60,000, the full child benefit is paid back via Self-Assessment. If you know your income is always more than £60,000, you can choose not to receive child benefit, thus making your Self-Assessment tax returning simpler to complete, or in some cases not a requirement at all.
 
You will be able to find your total income from investments from your annual statements. However, if you are unsure about the figures your Wealth Planner will be able to clarify your situation. Completing your Self-Assessment tax return is always a good reminder as to why investing and saving using your annual ISA allowance is so important, as you don’t have to pay tax on money which is held inside an ISA wrapper. If you haven’t saved or invested into an ISA this current tax year (2015/16) then there is still the opportunity to do so: you have until the 5th April 2016 to save or invest before you lose this year’s allowance. The ISA allowance for the 2015/16 tax year is £15,240, and the full amount can be invested into a Stocks and Shares or a Cash ISA (or any combination of the two).
 
You can find guidance on completing a Self-Assessment tax return by clicking here. Remember that an automatic penalty of £100 is issued to taxpayers who miss the January 31 deadline. If you fail to submit your tax return within 3 months, further penalties of £10 a day are applied with interest.
 
If you need help organising your finances, get in touch, we’d be happy to help. Please get in touch.

Date issued: 29.01.16

Please remember any views or facts expressed above are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness. Any expressions of opinion are subject to change without notice. None of the information should be regarded as advice. Past performance is not a reliable indicator of future results. Investing involves risk and the value of investments and the income from them may fall as well as rise and is not guaranteed. Investors may not get back the original amount invested. Any tax treatment is dependent upon individual client circumstances and may be subject to change.

Sanlam is a trading name of Sanlam Wealth Planning UK Limited (Reg. in England 3879955) and English Mutual Limited (Reg. in England 6685913). English Mutual Limited is an appointed representative of Sanlam Wealth Planning UK Limited which is authorised and regulated by the Financial Conduct Authority.

Registered Office: St. Bartholomew’s House, Lewins Mead, Bristol, BS1 2NH.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.