Q. I registered as self-employed in 2005, but as I didn't have any income I ignored the tax returns the tax office sent me. When they demanded £1000 tax for each year I got my act together and sent in the completed tax returns which showed no tax due. Now the Taxman won't cancel the tax demands issued for the years before 2008/09. What can I do?

A. You have been caught by the tax law here. The years before 2008/09 are 'out of time' and the Taxman doesn't have to cancel the tax demands for those years. Although you may be able to appeal for the tax demands to be cancelled under 'special relief', but you need to show it would be unconscionable for the Taxman to collect the excessive tax. This is a very high hurdle to clear.

I work as a nurse in a NHS hospital. Is there a limit on what I can claim for the cost of the particular shoes and socks I need to wear for work?

Q. I work as a nurse in a NHS hospital. My professional organisation tells me I can claim tax refunds for the last 6 years, for the cost of the particular shoes and socks I need to wear for work. Is there a limit on what I can claim?

A. There are set limits for such costs, known as flat rate expenses, which vary according to the taxpayer's profession and work description. The full list of tax claimable flat rate expenses can be found here: http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm. Nurses can claim £100 per year as a flat rate expense against their taxable income for uniforms without any receipts but in addition can claim £12 per year for the cost of shoes and £6 per year for stockings or tights. The £100 figure was £70 per year from 2004/05 to 2007/08. However, you need to make your claim quickly, as the deadline for claims relating to 2005/06 is 31 January 2012. The deadline for 2006/07 is 31 March 2012, and for 2007/08 it's 5 April 2012. However those deadlines only apply if you were taxed under PAYE, and did not submit a self-assessment tax return for those tax years. If you did submit a self-assessment tax return for the year the claim relates to, your claims period is already limited to 4 years from the end of that tax year. In that case the earliest year you can claim for is 2007/08, and the claim must be received by HMRC by 5 April 2012.

I earn £30,000 p.a. taxed under PAYE, but also have a variable amount of rental income.

Q. I earn £30,000 p.a. taxed under PAYE, but also have a variable amount of rental income. I read that 40% tax applies above £35,000 but I've also been told I can earn £42,475 before paying 40% tax. How much rental income can I receive before paying 40% tax?

A. The 40% tax rate applies in the current tax year (2011/12) on taxable income above £35,000. This is your total income (earnings, rentals and any interest or dividends) less your tax free allowance of £7,475 and any other valid deductions, such as expenses relating to your rental income. So you can have gross income before deductions of £42,475 (£35,000 + £7475) before you have to pay 40% tax. However, you must declare any rental income you receive to HMRC.

Do I have to submit my April 2010 personal tax return again?

Q. I've received a letter from the Taxman asking for my tax return for the year to 5 April 2010 to be submitted. But I submitted that tax return in September 2010, and I've paid all the tax due for that tax year. Do I have to submit that form again?

A. No. The letter you have received from the Tax Office is a mistake. About 40,000 of these standard letters (Notices SA316) have been printed with the wrong tax year: 2009/10 rather than 2010/11. You should receive another notice SA316 asking for the tax return for 2010/11, and a letter of apology concerning the mistake.

Do I have to pay tax on my property profits?

Q. My rental property makes a profit of £2,400 a year. I checked the HMRC website and it says I don't have to complete a tax return. Does that mean I don't have to pay tax on my property profits?

A. Although the HMRC website (www.hmrc.gov.uk/sa/need-tax-return.htm) says you don't have to complete a tax return if your income from property is less than £2,500, you should scroll down and read the text under 'Things to check if you don't need a tax return'. This makes it clear that you must tell the Tax Office about any new sources of income. The deadline for reporting new income is 5 October following the tax year in which the new income first arose. If this date passed sometime ago you need to contact the Taxman as soon as possible and declare all your income and expenses relating to your let property. The Taxman may decide to charge you a penalty for failing to declare your income at the right time.

You do have to pay tax on your property profits, but if the amount owing is small compared to your salary, it may be deducted through your PAYE code. In this case you don't need to complete a tax return each year, but without an annual tax return the Taxman will not know to vary your tax code if your rental profits increase or decrease.

Late Tax Returns and Payment Penalties

Late Tax Returns: Your personal tax return for the year to 5 April 2008 should have been submitted to the Tax Office by 31 January 2009 at the very latest. Tax returns submitted on paper for that year were due in by 31 October 2008. These deadlines may be later if the 2007/08 tax year was the first year for which you needed to submit a tax return, and you didn't receive the tax return form until after 31 July 2008.

The Taxman does not have much patience when it comes to late delivery of tax returns and has instructed his computer to send out £100 penalties every six months. The first penalty would have been issued in February 2009 and the second one in August 2009. If the Taxman gets really cross he will ask the Tax Tribunal to issue daily penalties of up to £60 per day, until you do deliver a complete tax return!

If you have paid all the income and capital gains tax you owed for 2007/08 by 31 January 2009, or you are due a tax repayment for that year, the £100 penalties can be reduced to nil. However, you do have to appeal against the £100 penalty notices to claim the reduction.

Late Payments: If you have not paid all the tax you owe for 2007/08 you will have been issued with a 5% surcharge in February and another 5% surcharge in August, plus interest will be mounting up at 2.5% on the amount owing. This interest rate on late tax increased to 3% from 29 September 2009. Where you have agreed a time to pay plan with the Tax Office, and are paying the instalments due under than plan on time, the 5% surcharges should not have been raised. If this is the case the Tax Office should be contacted as soon as possible to get the 5% surcharge cancelled.