Daunting is probably the first word that comes to most peoples’ minds when they hear the words ‘tax return’, and rightfully so. The world of tax is filled with intricacies and caveats. Plus the punishments for getting your filing wrong can be costly.
But fear not, CrewFO is here to help. In the article below I will detail some key misconceptions relating to tax returns, my top tips for preparing for your tax return filing, and the importance of submitting an early tax return.
Tax Return Misconceptions
First and foremost, the biggest misconception for crew starting out is that seafarers are exempt from paying tax and as a result do not have to submit a tax return. In actual fact there are a variety of factors that come into play when determining if you
qualify for an exemption, known as Seafarers Earnings Deduction (SED).
- Almost all crew do not have tax deducted from their salary. This DOES NOT mean your salary is tax-free. Somewhere in your contract, it will state that you are responsible for declaring your income and paying any tax you may owe.
- You need to submit a tax return to HMRC to declare you are exempt from paying any tax. If you don’t tell HMRC you are exempt from tax, how will they know?
- One thing to note is that SED only applies to income earned from working onboard vessels, you may still be liable for tax on other forms of income, including investments. You need to declare this with your tax return too.
- Another misconception is that you can get away with not filing any tax returns. In reality, this is not the case.
a. HMRC can fine you for not declaring offshore income. Imagine getting a fine for not owing any tax!
b. You need proof of tax returns in order to apply for a mortgage. Proof of a tax return filed is proof of income and is required in order to obtain a mortgage.
c. Penalties may be incurred for any tax years for which no tax return was submitted. - Rounding off our list of common misconceptions is that the tax filing process can be time-consuming and tricky. Here at CrewFO we make it quick and easy. All you need to do is fill in our form, and provide any necessary accompanying documents such as payslips. We take it from there and do the rest of the work for you.
Tax returns need to be filed by the 31st of January following the end of the personal tax year. For reference, the tax year for individuals runs from the 6th of April until the 5th of April the following year, so for the tax year ended 5th April 2023, tax returns have to be submitted by
31st January 2024.
My top tips:
So, here are some of my top tips for your next tax return:
- Flag your plane ticket emails as you receive them, or even better, save them to a file relating to the tax year. This will save you loads of time when calculating the amount of days you spent outside of the U.K. once the tax year has ended.
- Similarly, save all your pay slips to the same file as above. You will need these if HMRC decides to audit your tax return.
- Make sure you get your seaman’s book stamped by an officer every time you go on, and return from leave. It’s surprising how many crew don’t know this, I certainly didn’t when I started. This is used as proof of service onboard a vessel.
- File your tax returns as early as possible.
Don’t leave it too late! This last tip is something I, unfortunately, only figured out near the end of my time in yachting. The main benefit of filing as early as possible is that you avoid rushed submissions. This reduces the chance of potential errors and last-minute complications. It also allows for ample time to rectify any errors or discrepancies, thereby avoiding any penalties.
In addition to the above benefits, early filings allow you to gain a clear understanding of your tax obligations, which in turn enables better financial planning.
It also allows you to avoid any last-minute stress of looming tax deadlines, which is beneficial to those of you who are still in season in January and have other pressing tasks at hand. Also, it’s good for those of you who take holidays in January and don’t want to stress or work on your time off.
If you have any questions regarding your tax return or just simply need to submit one, please get in touch with us via www.crewfo.com or info@crewfo.com