Sunday, 24 April 2011

Reframing Taxes

As of this writing I am still in the throes of completing my income tax return.  Living abroad, I'm not required to file until the 15th of June.  I'm not sure why other than for the fact that the British financial year begins on something like 5 April.  This can sometimes make getting information for the calendar year a bit tricky.  Then again in the US the tax year is Jan-Dec, whereas the 'fiscal year' is Jul-Jun.  Go figure.

I was whinging one day about having to start this process when Bill said, "You know you love it, really."  He wasn't even being sarcastic.  It made me think of Gretchen Rubin's recommendation about 'reframing'.  She talks about this - and her other happiness concepts - fairly often, so you can search the blog for this word and find other examples.  I think of it as a form of lying to oneself, but if it makes me happier, I'm all for it.  So I tried it with taxes:

I hate doing my tax returns.  I really enjoy doing my tax returns.  It forces me to gather information about my financial situation that I am normally too lazy to collate.  It is often good news and when it's not good news I have the picture in front of me so I can make decisions to improve it (ie find a new property manager).  This information gives me a better sense of what I can realistically spend, given my erratic income.  Completing the forms is like working through a complicated puzzle.  I always feel good about having figured it out when I'm finished.  If I'm not thrilled about the bill at the end, well, taxes are the price we pay for living in a civilized society.

It almost works, actually.  I've motored through the process so far, stymied only when I had to go into town to do a face-to-face transaction to get the necessary information about interest on an account.  Some aspect of British finance are still quite archaic.

However, there are some aspects that I think are more advanced than in the US.  Though I think 20% VAT ('value added tax'...I ask you) is scandalous, you pay no sales tax on children's clothing or basic unprocessed foods (which is what we should all be eating anyhow).  A lot of people don't have to fill out an income tax return at all.  Like in the US, UK taxes are taken out of salaries, but unlike in the US, tax at the basic rate (20% after the living allowance of £7,475 / $12,375) is taken out at source from interest bearing accounts.  As long as you are in the 22% income bracket, just under $58,000, or have income from an unusual source, you don't have to bother with it at all.  There are accountant's offices on every corner, seemingly, so they haven't exactly been wiped out by this practice.   Also, with the Inland Revenue (part of Her Majesty's Revenue and Customs), you have the option of giving them all your information and letting them calculate how much you owe, saving another 5 or 6 pages if I recall.  I did it myself the first year (after learning I needed to pay UK tax on my US income - ouch) but have had them do the maths (in Britain it is apparently plural) ever since.  They come up with a similar figure so I let them.

Mind, having rental income I'd probably always have to file anyhow, but were it to change I think I might be quite tempted to sell up and simplify my life.  But I do actually enjoy doing my tax returns...really....  Must work on this one.

Other cartoons to cheer you up about taxes here.


Rick Stone said...

I simplified doing our taxes several years ago. Each year I go to Best Buy and buy a copy of Turbo Tax software. Just fill in the necessary info as the software walks you through, print it out and mail it in (along with a check to the Feds the past couple of years.) The same software also allows me to do the state return after downloading the Oklahoma forms.
This year we were given until Monday, April 18, to file since Friday, April 15, was a Washington, DC, holiday so all government offices were closed. (It seems Washington DC is the only place in the country that celebrates Emancipation Day.)

Anonymous said...

I remain unconvinced by your "reframing." So, you are paying US income tax on income earned in the UK?

Shelley said...

Rick - there are similar programmes over here, too. Could try buying the US programme and the UK one...but still more money than I care to shell out.

Terry - US citizens pay tax on their worldwide income. UK residents pay tax on their world wide income. They have a treaty that says I won't pay double tax, but I'm not convinced it works. My only UK income now is interest income, and most of that is in tax-sheltered investments - sheltered from the UK tax, anyhow.