Completing your self-assessment tax return
If you are taxed under PAYE and have no additional tax to pay on other incomes then you will not have to complete a self-assessment tax return. However anyone who has additional income or who works as a sole trader, a freelancer, a contractor or who runs their own business, will need to complete a self-assessment tax return.
This can be quite daunting and many people can put this off for months for fear that they will make a mistake or not know what to include.
Completing a self-assessment tax return can be a time-consuming process. While guidelines are available from HMRC on what you need to include and how to calculate your income and expenditure, their basic guidelines can be a lot to plough through when you have a business to run. Add the pressure of a deadline looming at the end of January, and you can see why so many people dread tax return time.
However, Davies-Burrell & Co can complete and submit your tax return for you and ensure that it is completed correctly as well as helping you to identify areas where you could save money on your bill.
Our self-assessment tax return service is perfect for self-employed individuals and those running small businesses, and we offer an efficient service for a great price.
Here some frequently asked questions about the issues which people ask about most:
Why do a tax return?
HMRC use your tax return to calculate your tax liabilities, including any amounts you owe or sums that you might have overpaid.
Information about your income, expenditure, capital gains and deductible costs are used to calculate your total, or taxable, income. These figures then determine the amount of tax you need to pay (or may be due as a refund).
Do I need to complete a tax return?
Most people are employed and have their tax and National Insurance deducted at source, using the Pay As You Earn (PAYE) system. This means that the company they work for deducts their tax and pay it direct to HMRC automatically.
If you are self-employed, either as your main job or in addition to traditional employment, you will need to complete a self-assessment tax return in order to be taxed appropriately by HMRC.
You can let HMRC know that you are working for yourself by calling them or completing the registration process online through HMRC’s website and you need to do this as soon as you can to ensure that you aren’t penalised for failing to keep your records up to date.
You will also need to complete a tax return if you have other sources of income such as dividends, property rental income or holiday let income.
Where do I start with my tax return?
Completing a tax return can be a little confusing for many people. The rules and regulations which apply to various different aspects of income and expenditure can be difficult to understand.
When you become your own boss and work for yourself you undertake everything you need to make your business a success. Managing finances can be more complex than you thought and you will need to keep records of everything you spend money on in addition to keeping records of all money coming in to your business.
You may be taken aback by the complexity of tax systems and it can be easy to make a mistake on your tax return; a mistake which could be expensive with potential penalties from HMRC.
Davies-Burrell & Co can make sure that you include everything you need to on your tax return. We can also submit it for you and we could save you money by making sure you don’t pay more than you need to.
If you want to complete your tax return without assistance there are two options for completing tax returns. Each has its own deadline.
1. A paper tax return is a physical form which you need to fill in by hand and return by 31st October every year. It is your responsibility to ensure that it arrives with HMRC by the deadline in order to avoid a fine.
2. Online tax return via the HMRC website. This has a self-assessment tax return feature which allows you to complete the whole process through your Government Gateway account. This has a later deadline so you can complete it at any point up until January 31st. You can begin filing your form in and save it as you go so you don’t need to complete the whole thing in one session and can check your records, seek advice and alter any mistakes before you submit it.
What details do I need to include in my tax return?
An accountant will tell you what you need for your tax return and can help you identify which information is relevant. In general though you will need:
Your annual income coming in from your business during the tax year. This is usually the amount you have invoiced clients for, or the number of sales you have made in the relevant period.
Interest you have earned on money in your bank account.
Additional income from other employment during the relevant period, either from working part- or full-time for an employer, or for a period during the tax year before you became self-employed. Details of these earnings will be on a P60 if you are still employed, or a P45 if you have left.
Any income you have made from renting property and other allowable expenses relating to this income.
Any "allowable" expenses incurred in the course of doing business. Generally, costs related to your business such as purchasing stock or travelling to meet clients can all be deducted, but it is a good idea to seek professional advice regarding claimable costs and expenses as they are many guidelines on what you can claim.
The amount of tax you have already paid as deductions from your income for the tax year.
National Insurance Contributions paid over the course of the year.
You will need to have this information to hand to be able to complete your tax return, and we recommend you also keep records, receipts and any other related paperwork for anything that relates to your business since HMRC can ask to see details to back up your claim and ensure accuracy.
Some people keep a spreadsheet with details of all their invoices, expenses and other financial information together. You can track your expenditure on items such as stationery, marketing, phone costs, travel expenses and anything else you buy for your business. This will then allow you to calculate your profits by deducting your expenditure from your income, which is a good way of keeping track of your finances as well as helpful for completing your tax return.
If are self-employed you are legally obliged to keep these records for five years after the tax return deadline, so for details of your 2019/20 tax return submitted by January 31st 2021, you will need to keep the relevant records until January 31st 2026. Companies have to keep these records for six years, and failure to do so on either part can result in fines of up to £3000.
What expenses are allowed on my tax return?
Self-employed individuals usually have some costs associated with running their business, and whilst some are clearly business-related, such as stock or a website, some are less clear cut. For example, if you work from home, you might be entitled to claim some of your heating bills as expenses on your tax return but working out what proportion can be difficult as some of your bill will cover heating your home for times when you aren’t working. If you use your car for both business and personal use, then you need to work out what proportion you use it for work and that will be an allowable expense.
You may find it easier to identify which costs are related to your business by having a separate work account as this will enable you to use your dedicated account just for your business expenditure. Expenses can be one of the more complicated areas of tax, so it is worth taking advice from professionals if you are not sure about any aspect of it.
How do I complete my tax return?
You can complete your own Self-Assessment Tax Return, but it can seem complicated and incredibly difficult, especially if you aren’t sure about the finer points of the regulations. You could miss something crucial which will leave you potentially facing a fine, or you could leave out information which could save you money on your tax bill and end up paying too much that way.
If you have any concerns about filling in your self-assessment tax return, you may benefit from using an accountant who will ask you for the relevant information and complete all the paperwork on your behalf, saving you time, stress and probably money too.
What are the deadlines for submitting my tax return?
If you wish to complete a paper tax return, then you will need to ensure that HMRC receive it by 31st October.
If you wish to complete the online form, then you will have to submit it by 31st January.
You will be sent a reminder of these deadlines by HMRC, but if you use an accountant they will usually make sure you have everything organised well in advance anyway.
What if I am late completing my tax return?
Unless your tax return is received by the deadlines above, you will be fined £100 plus interest on any tax which is unpaid by this deadline. These penalties can be applied even if you don’t owe any tax as HMRC need to know your status either way.
If you still have an outstanding tax bill by 28th February, you will be charged a further 5% on any tax that you still owe at that time.
What is the deadline for paying my tax bill for 2020/21?
Anyone who has commenced self-employment during the 2020/21 tax year (April 6th 2020 to April 5th 2021) will need to register with HMRC for self-assessment by October 5th 2021 and complete their first self-assessment tax return by 31st January 2022. This will also be the deadline for paying your tax bill, as well as your first ‘payment on account’ to pay in advance for your tax bill for the next year.
For example, if your tax bill for 2020/21 is £4000, then you will need to pay that £4000 and a £2000 payment on account by the 31st January 2022 on the assumption that you will earn the same amount in the next tax year. This brings your total to £6000 for the January deadline.
You will then have to pay a further £2000 in July 2022 to settle your account.
If you have good reason to believe that your tax bill will be significantly higher or lower than the previous year’s tax bills, you can contact HMRC will details of why you think this may be true in order to have your payments on account adjusted accordingly.
If you wish to save yourself the stress of completing your tax return yourself, not to mention find out if you could be saving money on your tax bill, then our accountants are on hand. Our swift and efficient service will ensure that you have everything you need to file your return and pay your bill on time, saving money and avoiding fines as you do so.
Get in touch via the Contact Us form for more information on how we could help you.
Individual Self Assessment Return (SA100) £150
This includes sections for employment and self-employment.
Partnership Return (SA800) £150