Do It Contemporaneously! 10 Tips To Manage Your Tax Return Paperwork

It amazes me to see how small businesses and clients who have relatively simple tax affairs manage to get themselves in absolute panic and mess every year when the time comes to prepare and submit their tax returns. I am not talking about large businesses or individuals tax payers whose affairs are complicated. They have full time accountants who look after their tax affairs. Here I am talking about self employed clients such as tradesman, subcontractors,  hairdressers, beauticians, mechanics, consultants or tax payers who are higher rate tax payers and have other income such as  investment income, P11d  benefits rental income etc.

The reason they get in to panic is because they are unable to find their tax paperwork or manage to lose their paperwork somewhere between the time of receiving it and when they start getting harassed by their accountants for information. Eventually if and when they find the paperwork they are so stressed out by the whole experience they start blaming their accountants for incompetence and overcharging. So many times I receive paperwork from clients in the envelopes they came in unopened yet! It is as if some people get a phobia of opening brown envelopes or otherwise. I have a few simple tips and if followed your lives will be much easier and I promise you will not panic around Xmas and digest that turkey very nicely!

  1. Buy yourself a lever arch file or two and label it in big letters TAX FILE 2012/13 and 2013/14. Make sure to remind yourself that the tax year runs from 6th April to 5th April.
  2. Make sure to open all the envelopes you receive through the post. If you are unable or unwilling to do so request your partner if they are willing to open up your post for you. If they are unwilling, offer to pay them for their services. Any payment you make them is tax deductible! If it does not work ask your children and give them a letter opener (they find it really exciting, but beware of health and safety) and promise to pay them pocket money which is also tax deductible as long as it is not slave labour and it is a minimum wage. Ask them to keep all the paperwork on the table in the order it is received. Make sure no one uses your table (even your partner to tidy up!)
  3. Go through the paperwork every week, on Sunday in the afternoon after lunch while either watching the telly or listening to radio 4 or listening to your favourite music. File the paperwork in the respective tax files in the same order you received. If the paperwork suggests it has something to do with your self employment business, file it. If it tastes, smells and looks like something to do with tax, file it. Don’t worry it will take little bit of time but soon you will be able to separate out tax paperwork from other paperwork quite easily.
  4. Mark on the paperwork as much detail as possible apart from the paperwork which is very obvious such as a dividend voucher, or interest certificate from the bank. For example: If it is an invoice  from a supplier mark on it when you paid it and the manner in which you paid it such as by giving the cheque number and the date when paid or paid if by online or if paid by cash. You can do this for both income and expenditure. Write as many notes as possible so you do not forget later as to what was the income or expenditure for.
  5. File business and personal bank statements separately in the order you receive them. It is surprising how many people lose their bank statements over the period. Even one missing bank statement can cause a problem because it may hold some very vital information. Make as many notes on the bank statement itself as to the nature of income such as invoice number if it is income or nature of payment if it is an expense which should correspond with the invoice or paperwork on your file.
  6. File all your employment paperwork in the order you receive such as forms P60, form P45, P11d  forms, Paye notices of coding, pension contribution letters, tax deduction certificates from banks and building societies, dividend vouchers, letters from pension offices informing you of pensions being paid to you, any H M Revenue correspondence etc.
  7. Do this filing contemporaneously (which means as you go along). H M revenue & Customs like this word very much. Remember to do this as you go along (which means not once in a year!) but every week or every month depending on the volume. I do this every week. This is also an opportunity to get rid of all the rubbish you have and do not need. Have a shredder near you and shred everything you do not need. Please please do not use black sack for this exercise as you do not want anyone to steal your identity later on!
  8. As soon as 5th April is over make a mental or written note for yourself to wait for another 25 days to file in more late information. Make an appointment to see your accountant on 1st May or on a day after that date when convenient. Tell him or her you will be bringing in your tax return file and request a discount of whatever amount you can get away with. It could be between 5 to 10 % depending on your tax affairs.
  9. Keep that appointment and handover the file to the accountant and make him or her promise to prepare your tax return by a certain date.
  10. Wait for your prepared tax return to arrive. Perhaps it will put a smile on your face either because your tax and accountants bill is lesser than you thought or perhaps you are due a repayment which should arrive in your bank account within weeks of submitting your tax return online. If you have a tax bill to pay you will have plenty of advance warning because tax is payable by 31 January and 31st July. If you think your next year’s income will be lower than the current year then it gives your accountant an opportunity to reduce your payments on account even further. This would enable you to manage your cash flow properly and perhaps encourage you to save for your taxes. Many start up self employed clients get a shock when they receive their first tax bill as they realise not only do they have to pay their taxes for the current year but in addition half of the taxes on account of the next year. Please remember you need to save for your taxes very regularly. Your accountant should be able to tell you the savings you should make.

If you follow these simple steps not only you will reduce your stress levels but you will keep on top of your paperwork and on top of your taxes and maybe even reduce them because you kept your files and paperwork intact and contemporaneously! Remember this word, I promise you will also get to like it.

Ratan Lele – Partner

Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936. Talk to the team at Westbury on 0207 253 7272; or visit