RSS feedsMost of us would rather ignore the thorny issue of income tax as far as possible and, most of the time, we can. Unless you're self-employed, it's deducted at source before you receive your pay or is reclaimed by pension providers through the PAYE system.
Things are changing, though, and the Inland Revenue is now trying to nudge more of us down the route to self-assessment, meaning you have to fill in a tax return form yourself instead of the Inland Revenue taking care of things for you.
At present, self-assessment is largely aimed at the self-employed or those who have irregular or unusual income or employment status. Nonetheless, there are compelling reasons to pay more attention to your taxes.
The suspicion remains that the Inland Revenue will eventually switch us all to the American style of self-penned tax returns each year (it saves the taxman money to get us to do the work). Then there's the Inland Revenue's own frightening admission that it miscalculates the tax we owe in 28 per cent of cases. Of course, most of us never know because we never check.
Got your attention now? We thought so. The point about using tax return (and tax checking) software isn't just to simplify the mundane maths, but to check what you're entitled to. To this end, we've looked at some of the best tax software on the market today.
These packages will help you work out your liabilities, complete your tax return, file it online and claim for what you're owed. Some are standalone packages, some come as part of personal finance suites, but all will make your life easier.
Before you start
One of the great myths about tax returns is that the tax year ends/begins in April and that this is when our tax return is due. While this is true for some, there are numerous other deadlines throughout the year you need to be aware of. After all, it wouldn't make much sense for the Inland Revenue to be dealing with everyone's tax return on 6 April.
It's a good idea, therefore, to start off by visiting the Key Dates part of the Revenue's website and checking the various dates for submission and payment. (If it's not clear when you have to submit, call or email the Inland Revenue.)
This is an admirably clear and navigable website and the Inland Revenue could teach a few customer service departments a lesson in responding to email enquiries. We emailed the Contact section twice, each time with remarkably dopey questions, and each time we got answers within a day.
Before you sit down to complete your tax return, get all the paperwork together. That means (if appropriate) your P45, P60, any building society or bank interest statements, share dividend certificates, records of rental income, anything that records income or justifiable work expenses.
Now make yourself a cup of tea and you're ready to go. There are a number of personal finance packages on the market, but we've chosen just a few. First, Microsoft Money. You can buy a basic version but we'll look at the Deluxe 2005 edition, which includes TaxSaver 2004 as part of the deal. Alternatively, you can buy TaxSaver 2004 on its own.
Money's major competitor, Quicken, once came bundled with the TaxCalc package. Now its makers, Intuit, sell the two separately, although they mesh well together. We have taken a look at both in this feature. Finally, we will also look at Equavia Taxsaver, a minnow taking on the Intuit and Microsoft giants.
Helping hand
Tax software doesn't have to do anything fancy and only needs to change enough each year to encompass current legislation. In fact, it has to do just three things: make it easy to fill in the return, get the maths right, and cope with those changes in the law that Gordon Brown brings in for each new tax year.
Intuit boldly addresses the latter two issues by guaranteeing to refund the purchase price of the TaxCalc software (£25 from www.taxcalc.com or 0870 240 4801), plus any penalties that arise from inaccurate TaxCalc calculations, should the software mess up.
That's all well and good, but how easy is TaxCalc to use? While it's not going to make doing your tax return fun, the software is simple and intuitive. In fact, Intuit claims you can "complete your return in 30 minutes". We have some doubts, but maybe if you were really organised you might just pull it off.
TaxCalc is breathtakingly simple and quick. Pop in the CD and a minute or so later you'll be inputting figures. While all this simplicity may make it seem as though you're not getting much for your money, you are. The program makes completing the tax return very easy, and that's priceless.
On the screen you'll see a facsimile of the tax return. As you punch in numbers, the displayed totals on the return are adjusted accordingly, making it easy to spot omissions and go back and amend figures. Then you can simply file the return electronically online.
And if there are gaps in your paperwork, you don't have to spend days searching for the necessary information. The taxman isn't as draconian as most of us imagine, and an honest estimate of expenses (percentage of petrol you claim as a business expense, say) is usually enough. TaxCalc even provides forms to allow you to put in a note to that effect.
Money, money, money
TaxSaver Deluxe has been around for a few years now and comes either bundled with Microsoft Money Financial Suite 2004, or as a standalone product. We can pay no higher compliment than describing TaxSaver as basic. Load the software (you can download a trial from www.digita.com) and you'll see a succession of simple forms that quiz you on personal details and sources of income.
These are placed within a facsimile of the Inland Revenue forms and there are links throughout to online Inland Revenue notes and fact sheets. Return completed, TaxSaver checks that nothing's been missed. At this point you'll find out your liability or how much rebate you are due.
Once you're done, you just hit a button to file the return electronically or, if you prefer, print, sign and send it to the Inland Revenue. All the forms are Revenue-approved, as is TaxSaver itself.
Another option is not to buy TaxSaver as a standalone product (at around £30), but bundle it with Microsoft Money. The deals change year by year, with each new version of Money, but the current version twins Money Deluxe 2005 with TaxSaver Deluxe 2004 for £60 (from www.microsoft.com/uk or 0870 60 10 100).
Microsoft Money is a fine piece of personal finance software, but you have to decide whether the additional features are worth an extra £30. One problem is Microsoft's eagerness to mesh the applications together, forcing us to wade through Money to get to the tax forms. There are so many parts to the software and there is so much going on that it can become quite tedious.
Intuit has tried the same idea. TaxCalc will cost you £25, but for twice that you can get it bundled with Intuit's Quicken personal finance package. The two knit well together, and exporting data from TaxCalc to its pal is easy.
With both, though, you have to decide if you really need the additional personal finance software (most of us overlook Excel, which almost all of us own and which does an excellent job of book keeping). If you decide you do, Money and Quicken are the best in the field. If not, stick with the simple standalone tax solutions.
Simply simplicity
Equavia's Tax 2004 (£26 from www.equavia.co.uk or 0800 195 0709) is a culture shock after the Microsoft and Intuit software: there's no chunky manual, no whizzy interface, even the packaging is basic. But for a few quid less than TaxSaver, it still delivers.
Tax 2004 lets you calculate and process five standard SA100 tax return forms (if you have five friends who also need a hand filing their tax return, you could share the cost of the package). It lets you file your return online or print out information on standard Inland Revenue forms and file by post.
Within the software you'll find standard forms dealing with share schemes, self-employment and partnerships. You'll also find forms for foreign investments, land and property, trusts, Capital Gains Tax and non-residence.
Rather than an on-screen facsimile of the actual tax return, Tax 2004 uses its own layout, letting you preview the finished form at any time. This browser-type interface lets you switch between the 'pages' of the return, launches a new tax form, saves your return and finally lets you file.
It's simple, it's approved by the Inland Revenue and it works. There are no general tips and advice on filing your tax return but you can get this from any number of useful websites. We've rounded up the best of these at the end of the feature.
File online for free
Perhaps you don't want to use personal finance software or pay for a program. If this is the case, the most economical approach is to go to the Inland Revenue website and file your return here. Doing so is entirely free. Here you will be walked through an online version of the paper tax return. It looks just the same but it's easier to use.
The online return form benefits hugely from the interactivity of the internet. Down the left-hand side of the page you'll see a menu dealing with different aspects of the form: checking your account and how much you owe, information on tax credits and child benefit, calling up the form and filing online.
Down the right-hand side of the page you'll see FAQs (frequently asked questions) explaining what the various deadlines mean, the logistics of using the site and so on. You'll need to have your unique tax reference number to hand (you'll find this 10-digit identifier on any correspondence from the Inland Revenue) and either your National Insurance number or postcode to register on the site.
Another useful site to visit is Refunds Direct; the on-site 'sixty-second survey' is a Q&A, which will instantly tell you if you qualify for a refund. Other sites offering a similar service include PAYE Check, while Haines Watts has lots of tax-saving tips.
Our tip here: don't pay for any of these services when you'll find perfectly good ones free of charge. The fact that it only takes 60 seconds to run the check gives you a clue that this stuff isn't rocket science: tax payable is worked out according to fixed formulae, the information gleaned from your return. Apart from that, it's a matter of knowing everything you can claim for and how to go about claiming it.
Tax isn't taxing
All the software packages we've mentioned in this feature are excellent value for money. The programs we've looked at make the process of filling in your tax return very easy and combining the process with handy tax tips (and working out your bill for yourself) gives you a very good chance of saving money, possibly thousands of pounds a year.
The simpler the process is, the more likely you are to do it, and the less likely you are to get charged for filing a late return. And, while few taxpayers carry much of a torch for the Inland Revenue, we like its online tax return filing system, and you can get by quite happily using this to file your return.
If you're looking for a more comprehensive solution to your personal finance needs, though, we'd recommend both Quicken and Money, although Money's superb online support tips the balance in Microsoft's favour.
Be sure to back up
The Inland Revenue is pretty strict when it comes to encouraging the rest of us to keep accurate records of our income; indeed, it can ask you to go back into your records for several years if it decides to audit your books. Yet the Inland Revenue's own systems for customer accounts have had a pretty bad press lately.
A few years ago, attempts to encourage taxpayers to file their returns online, combined with the first moves towards universal self-assessment caused a huge backlog of tax returns, submitted on time but stuck in a queue for processing at the Inland Revenue.
And November 2004 saw embarrassing reports that the Inland Revenue had accidentally wiped a number of taxpayer's records as part of "a routine database administration process". How many? "We don't know," said a representative, who described it as a "housekeeping" exercise. A radical form of housekeeping which involves not merely dusting the furniture but throwing it into a skip, perhaps.
It won't affect you unless you are one of the unlucky taxpayers that needs the Revenue to call up your records to check on a rebate (if you've underpaid we'd suggest you wait until they call you). But it does emphasise the importance of keeping good clear records.
That means backing up onto removable media such as a CD or DVD or a removable USB drive. You should also keep paper copies of everything. Print them out, photocopy them, but don't rely on the Inland Revenue computer systems alone.
Get a little help online
Filling in your tax return can be daunting and, sadly, Intuit's online support for Quicken and TaxCalc, is hugely underwhelming, consisting largely of invitations to subscribe to paid-for support.
The programs have a huge user base, though, having been around for years, so there are alternatives: Dr M's tipsheet, for instance. Don't be put off by the appalling look and layout of these pages. This free sheet is packed with useful tips, keyboard shortcuts and mini tutorials.
TaxCalc, meanwhile, has a dedicated help web page complete with helpline numbers for users of the product. Support is where Money really scores. As well as having a good paper manual, the online guide is heavy with step-by-step tutorials, a glossary, tips and features on tax, saving and more.
It gets even better: Money also has its own dedicated website, packed with news and ideas. The tax pages are astonishingly detailed; read them well and you'll find it hard to go wrong.
See also:
All Software Applications
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