Ever wonder where your tax goes? Well, let me tell you

Have you ever wondered where your income taxes go? Well, the good news is that if you have a personal tax account (it's easy enough to obtain one, see here) you can. However, to save you good people the trouble, I went and looked at mine. This is on a percentage basis how my taxes got spent (everyones should be the same):

Description	2017-18	2016-17	2015-16	2014-15	Avg.
Welfare	23.8%	24.3%	25.0%	25.3%	24.6%
Health	19.9%	20.3%	19.9%	19.9%	20.0%
State Pensions	12.8%	12.9%	12.8%	12.8%	12.8%
Education	12.0%	12.3%	12.0%	12.5%	12.2%
National Debt Interest	6.1%	5.5%	5.3%	5.0%	5.5%
Defence	5.3%	5.2%	5.2%	5.4%	5.3%
Public Order and Safety	4.3%	4.2%	4.3%	4.4%	4.3%
Transport	4.3%	4.2%	4.0%	3.0%	3.9%
Business and Industry	2.9%	2.5%	2.4%	2.7%	2.6%
Government Administration	2.1%	2.1%	2.0%	2.0%	2.1%
Culture	1.6%	1.6%	1.6%	1.8%	1.7%
Environment	1.6%	1.6%	1.7%	1.7%	1.7%
Housing and Utilities	1.6%	1.5%	1.4%	1.6%	1.5%
Overseas Aid	1.2%	1.1%	1.2%	1.3%	1.2%
UK Contribution to the EU	0.7%	0.7%	1.1%	0.6%	0.8%

I have shown the percentages for the last four years, and it throws out some interesting results. Largely the biggest shocker is that the percentages stay pretty stable over the four years, although there are a couple of culprits that seem to deviate from the average, principally spending on welfare and national debt interest.

HMRC helpfully also published a paper in November 2018 detailing how much tax they've collected (it can be found here), it really is a great cure for insomnia, I recommend it. However, if you just want to know how much tax the government collects check out page 4. Interestingly the "tax take" has been increasing year on year for some time. To get another idea of just how many different types of tax there are, you could do worse than looking at the Taxpayers Alliance.

I don't intend to draw any political conclusions, that's not my place (I'm a tax advisor after all, not a politician), but I will leave you all with one Brexit related fact though. The median annual income in the UK, according to the most recent Annual Survey of Hours and Earnings, is £28,677 for full-time employees. This means the average tax for an employee is £5,640. So, on average the EU gets £45.12 a year from your taxes...

Tax! What can you do about it?

Yes, I know it is tax return silly season. Yes, I know I should be spending my valuable time filing tax returns. So, why have I decided to write this blog? Well, believe it or not, it has actually arisen from having looked at so many tax returns lately. It never ceases to amaze me that every year I will have clients ask me what they can do to reduce their tax bill. For last year. In January. Oh, how we laugh...

Of course, we all know that the tax year ends on the 5th of April. Your tax return and payment of tax has to be dealt with by the following 31st of January.

Therefore, if I'm helping you file your tax return in January we're already nine months beyond the end of the tax year. So, if you're thinking about making that big pension contribution, or buying that new van, it's a bit late for us to offset it against your tax for last year, unless of course your tax adviser also happens to be Gandalf the Grey.

As with all things, there are of course some clever things we can suggest, like Venture Capital Trust (VCT) or Enterprise Investments Scheme (EIS) investments. Well, we can suggest them, but you'll need an IFA to do them. So, again it's unlikely anything can be sorted out in the dying days of January.

So, the point I'm trying to make (through the fog of a tax return induced migraine), is that rather than wait for the orcs of Mordor, sorry I mean the inspectors of HM Revenue & Customs, to come knocking on your door on the 31st of January you might be better seeking the help of your local friendly tax adviser before they arrive. So, to avoid an invasion of the forces of darkness (HMRC), best have that chat before the 5th of April...

Don't delay, file your tax return today!

Great to see some tax-related news from the BBC that's reasonably accurate today. Yes, I'm talking about tax return filing behaviour in the UK. If you want to take a look at their article it can be found here https://bbc.in/2M3QOIq courtesy of BBC News.

What's interesting though is that HMRC published this information on 1 February 2018 (https://bit.ly/2Fz7pzs courtesy of HMRC), although I suppose I should still applaud the BBC for bringing the plight of all of us humble tax practitioners to light.

Perhaps, at last, our clients will understand why we look like zombies at the end of January (and maybe they'll get their tax papers to us a bit sooner)!

For those who don't want to click through all the links and try to extract the facts, I'll set them out here:

• 11,433,349 Self Assessment returns were due for 2016/17
• 10,687,761 returns were received by midnight on 31 January 2018 (93.5% of total issued)
• Around 745,588 Self Assessment returns were still outstanding on 1 February 2018
• 9,916,430 returns were filed online (92.8%)
• 771,331 returns were filed on paper (7.22%)
• more than 4,852,744 returns were received online in January 2018 (44.8% of the total received)
• 1,290,948 returns were received on 30 and 31 January 2018 (26.6 % of total returns received in January)
• busiest hour: 4pm to 5pm on 31 January 2018 – 60,596 returns received (1,010 per minute; 17 per second)
• 389,849 payments transactions were handled on 31 January 2018

The really surprising thing is, go and apply these stats to your owns clients, you'll find those percentages are not far out. At the time of writing this, we're still waiting for about 25% of our clients to send us their tax information...

Have a productive January 2019 folks!

January Madness!

No, I'm not talking about the slow recovery from imbibing too much alcohol over Christmas and New Year, or even the sadomasochistic post-Christmas diet and exercise regimen, of course, I am talking about the final run-in to the 31 January! It's that time of year again for almost everyone working in tax (I'm sure even some VAT people get drafted in to help out at this time of year).

In order to try and make this month seem a little more bearable, I thought I'd share a little bit of festive humour, here are some of the reasons taxpayers have given to HMRC for filing their taxes late in recent years:

1. My pet goldfish died (self-employed builder)
2. I had a run-in with a cow (Midlands farmer)
3. After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else (London woman)
4. My wife won’t give me my mail (self-employed trader)
5. My husband told me the deadline was 31 March, and I believed him (Leicester hairdresser)
6. I’ve been far too busy touring the country with my one-man play (Coventry writer)
7. My bad back means I can’t go upstairs. That’s where my tax return is (a working taxi driver)
8. I’ve been cruising around the world in my yacht and only picking up post when I’m on dry land (South East man)
9. Our business doesn’t really do anything (Kent financial services firm)
10. I’ve been too busy submitting my clients’ tax returns (London accountant)

Source: https://www.gov.uk/government/news/revenue-reveals-top-10-oddest-excuses-for-late-tax-returns

Whilst I know some of these are getting old now, they're still quite amusing.

However, the matter of late filing is still very serious for the taxpayer (as well as being a post-Christmas headache for us practitioners). Of course, I am talking about HMRC's penalty regime:

• £100 – applied immediately the return is late;
• £10 per day – charged once the return is 3 months late for a maximum of 90 days;
• the higher of £300 or 5% of the tax due – applied if the form is 6 months late;
• a further £300 or 5% of the tax due (whichever is higher) – applied if the form is 12 months late; and
• you’ll also be charged interest on late payments of tax.

If they are going to be late, it's always worth considering if they do have a reasonable excuse. A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

• your partner or another close relative died shortly before the tax return or payment deadline
• you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
• you had a serious or life-threatening illness
• your computer or software failed just before or while you were preparing your online return
• service issues with HM Revenue and Customs (HMRC) online services
• a fire, flood or theft prevented you from completing your tax return
• postal delays that you couldn’t have predicted
• delays related to a disability you have

Source: https://www.gov.uk/tax-appeals/reasonable-excuses

Have a great 2019 folks!