Self Assessment Guide
It’s that time again. Not ‘the most wonderful time of the year’ (yet) but the run up to the Self Assessment deadline. Give yourself a less stressful Christmas and get your tax return sorted before the festive season starts in earnest.
Whether you’re planning on submitting yourself or engaging an accountant to do it for you, read on for our guide to preparing and submitting your Self Assessment. If you have any questions, just book in for a free 15-minute, no obligation call with our Client Director, Barry Cumberlidge.
What is Self Assessment?
Self Assessment is the system HM Revenue and Customs (HMRC) uses to collect Income Tax from people who don’t have tax automatically deducted from their income. The self-employed – and many employed people with more than one income stream – will need to submit a Self Assessment.
Where this is the case, you’ll need to file a Self Assessment tax return with HMRC to show how much money you’ve earned for the past financial year – as well as any relevant expenses – so that the taxman can work out how much tax and/or National Insurance (NI) you need to pay.
The process is a lot easier if you have a bookkeeping system in place (i.e. keep track of all income and outgoings, expenses, profits and losses throughout the year) and file away receipts and invoices somewhere you can quickly find them. We’ll talk about Xero further down, which is a handy accounting application that we’re offering for free to all new sole trader clients help with bookkeeping.
Who needs to complete a Self Assessment?
You’ll almost certainly need to carry out a Self Assessment if any of the following applies to you:
● You are self-employed as a ‘sole trader’ + earned more than £1,000 in 19/20
● You are a partner in a business partnership
● You have a freelance job in addition to an employed position
● You are a director or partner of a limited company
● You earn income from property or investments
● You are drawing a pension while continuing to work
● You earned over £100k even if you are not self-employed
● You are subject to the High Income Child Benefit Tax Charge
● You have income from overseas or you live abroad and have an income in the UK
If you’re unsure about whether you need to complete a Self Assessment or if you should opt for a limited company structure instead, get in touch and we’d be happy to talk you through the best option. A limited company structure could save you a big whack in tax, so make sure you’re confident being classed as a sole trader is the right set up for you.
How to register for Self Assessment
You’ll need to register with HMRC before you can submit a Self Assessment. You only need to do this once. If you’re newly self-employed, the deadline for registering was 5 October 2020 for the 2019/20 tax year. If you’ve missed it, you can still register but you might have to pay a penalty.
To register online, visit the HMRC website. HMRC will then send you a letter with your 10-digit Unique Taxpayer Reference (UTR). You’ll need that to sign up for HMRC’s online services. After doing so, HMRC will send you an activation code within 10 days so that you can log in to your online account.
When are the deadlines for Self Assessment?
The tax year for individuals runs from 6 April to 5 April. Your tax bill is then due in either the October or January after the end of the tax year, depending on how you wish to submit your Self Assessment. The deadlines are 5 October for paper hard copy returns and 31 January for online filings. For example, the 2019/20 tax year ran from 6 April 2019 to 5 April 2020. The deadline for paper copies has already passed (5 October 2020), and the deadline for online submissions is 31 January.
The deadline for payment of the amount of tax due is also 31 January, so it’s best to submit your tax return in advance of that date. You can submit your tax return at any time after the end of the tax year and before the 5 October/31 January deadlines, and we encourage clients to send us the relevant information far in advance so that we can file their returns to avoid any last minute issues.
When you or your accountant has submitted your information via the online portal, HMRC will calculate how much tax you owe within 72 hours.
How do I fill in my Self Assessment tax form online?
To file your tax return online, you’ll need to log in to your Government Gateway account and have all your income and any expenses to hand. You’ll need to go through each page of the online form, adding in the relevant personal and business information and figures. These include:
- Your income and earnings from dividends, shares and investments, pensions and property
- Details of any
- Business expenses
- Investments you own or have sold in the 19/20 tax year
- Any interest you’ve earned
- Charitable giving
- Student loan repayments
- Redundancy payments
- Benefits (including child benefit)
This is where having an accountant is really handy. We’ll be able to advise you on what exactly you can claim for, and make suggestions for costs that you might not have considered. Making sure you don’t miss out and pay more tax than you need to. Get in touch if you’re not sure what you’re able to claim on, or see the HMRC guidance on expenses.
This year, we’re also offering all new sole trader clients a free Xero account to help make the process of calculating income and keeping track of expenses quicker and less time consuming. Accounting software platforms like Xero help save the self-employed hours of time creating spreadsheets, downloading bank statements and calculating their tax liabilities. You can find out more about the offer here.
How do I pay my Self Assessment tax bill?
The deadline for payment of your Self Assessment tax bill is 31 January. It can take 72 hours for the calculation to appear in your online HMRC account, so make sure you factor that in.
You’ll be able to pay in one of the following ways (some methods will take longer than others, so make sure you leave yourself plenty of time):
- Online or telephone banking
- Debit or corporate credit card online
- Via your bank or building society
- Direct Debit
- By cheque through the post
Note: you are no longer able to pay by personal credit card, so make sure you’ve got around 30% of your earnings for the tax year available in your personal or business bank account.
Should I use an accountant or DIY my tax return?
If you’re considering completing your tax return yourself, it’s important to understand the time and risks involved.
While filling in the Self Assessment is relatively straightforward, understanding what you can claim back is not and will take research. It can be a time consuming process and you may end up paying more tax than you need to – or even worse, make mistakes that result in penalties from HMRC!
Hiring an accountant is tax deductible and will free you up to focus on the important things like eating mince pies and running your business.
While we’d obviously encourage you to engage a supportive and highly qualified accountancy practice like Moose to do your Self Assessment for you, if you have a good understanding of tax, and enough time to confidently do it yourself, then there are plenty of people who successfully manage the process.
If you have any questions or concerns, get in touch and we’d be happy to help. Here’s to a Self Assessment stress-free December! Book in a free, 15-minute call with us today, give us a call on 0203 026 4679 or drop us an email at firstname.lastname@example.org.