Having to complete your Self Assessment tax return can seem intimidating at first, especially if you’re not familiar with HMRC’s technical tax-related jargon. However, once you understand what you’ll be asked for, you’ll be able to prepare yourself, ready for a worry-free tax return.
It’s crucial to get to get to grips with how to file your tax return correctly, in order to avoid paying any penalties. Keep reading to find out what you need to know about the basics of Self Assessment tax returns.
What is a ‘Self Assessment’ and who is it for?
Whether you are partially, or fully self-employed, HMRC won’t know of your tax liabilities until you tell them. In order to inform them, you’ll need to register and submit a Self Assessment tax return (Form SA100) once a (tax) year, which can either be done online or by paper form.
You are legally obligated to file a Self Assessment tax return if:
- You are self-employed as a ‘sole trader’ and have earned over £1000 (before taking off anything you can claim tax on)
- A partner in a business partnership
If your only income is from your employee wages or your pension, you will not need to complete a Self Assessment tax return, as your taxes should be automatically deducted from your monthly pay slip or salary, otherwise known as the PAYE system or Pay As You Earn. That is unless you are an employee earning over £100,000 per tax year, then you will have to submit a tax return.
You may also have to submit a tax return if you have any other untaxed income, such as:
- Income for renting out a property
- Tips and commission
- Income from savings, investments and dividends
- Any foreign income
If you’re unsure whether or not you need to file a Self Assessment tax return, then check using this HMRC tool. The details or information you enter through the tool above won’t be submitted to HMRC, it’s just for your personal use. Alternatively, contact one of our tax experts over at Count.co.uk.
Key dates to remember
Our biggest tip to ensuring a smooth-sailing Self Assessment is to note these important dates down:
- April 5th 2021- Tax year ends
- April 6th 2022 – Tax year begins
- January 31st 2022 – You need to file your tax return online and pay your tax bill
- October 5th 2021 – The deadline to register yourself for a Self Assessment Tax Return
- October 31st 2021 – The deadline for paper tax returns
- July 31st 2021 – If you’re a freelancer, business owner or contractor, you need to keep in mind the “payments on accounts” dates in January and July.
- December 30th 2021 – Submit your online tax return if you want HMRC to collect the tax through your wages or pension over the next tax year using your tax code. Check eligibility here.
These dates do not change regardless of the tax year, so keeping up should be easy. Keeping track of these dates will benefit you in the greater scheme of things as you’ll find you that you’re less likely to make mistakes or submit your tax return late.
How to register
The first step you’ll need to make in order to complete your Self Assessment tax return, is to register with HMRC by the October deadline.
As an example, if you need to file your tax return for the 2021/2022 tax year, you should register with HMRC before the 5th of October 2021 at the very latest. If you miss the deadline, it’s likely you’ll have to pay a penalty.
You have the option to register online, or in paper form. Whichever you choose, make sure to give yourself enough time incase anything goes wrong.
We recommend registering and filing your Self Assessment as soon as possible, any time after April 6th (when the new tax year begins).
To register, you’ll need:
- Your National Insurance Number
- Any Personal and Business details
Once you’ve successfully registered, you’ll be sent a Unique Taxpayer Reference (UTR) number in the post, as well as a PIN number from HMRC that will grant you access to the HMRC Online Services, where you can begin to file your Self Assessment.
The registration process is soon to become simpler when HMRC rolls out online tax services without relying partly on the postal system to get registered.
You won’t have to re-register again every year, as you already have an account with the HMRC Online Services. You’ll be reminded yearly by HMRC to file your Self Assessment tax return.
In the case that you return to full time employment or move aboard, you can inform HMRC of your circumstances in which case, you will no longer be notified or need to file a tax return.
Filling in your tax return
Your tax return needs to include all details about taxable income and gains over the course of the relevant tax year.
Here are some of the typical items and documents you might need:
- Details of income and expenses from self-employment, to work out your trading profit/loss for the tax year
- Details of property income and expenses for profit or loss for the tax year
- Any employment and pension(s) income information, including related forms such as P60, P11D, P45 and any jobs you have had (in the tax year)
- Interest certificates from banks or building societies
- Details or pension contributions made to relief at source schemes
- Details of any chargeable capital gains made in the tax year.
It’s essential that you keep tangible records (physical or digital) of your taxable income and gains so that you can complete the tax return. For example:
- Receipts of your expenses
- Bank statements
- Details of rental income (i.e. statements from letting agents if you use one) etc.
You do not need to show proof of, or send original documents to HMRC showing your taxable records, however, HMRC can ask you questions later on, so you might need to use them as a back-up to show that you were being honest and responsible with your tax return.
How much tax do I owe?
As a sole trader, its essential to know how much money you owe, or how it’s calculated at least.
Once you have submitted your Self Assessment tax return, HMRC will review it to find out how much Income Tax and National Insurance you’ll need to pay.
For online tax returns, HMRC’s system (or third-party software) will calculate how much you owe on screen, before you press submit. However, with paper returns, it’ll take longer to receive your tax calculation as you’ll receive it back in the post.
As long as you submit your paper return before October 31st to HMRC, they guarantee to inform you how much you owe well in advance of its due date.
However, if you submit a return late, HMRC cannot be sure that their calculations will be done for you in time for you to make the right payment by its due date (January 31st).
This in turn leaves you at higher risk of paying your Self Assessment tax late, for which penalties and interest may become payable.
We advise that filing your tax return online will help decrease the chance of incurring a penalty.
Paying your Self Assessment tax bill
Make sure to double check that all of the information you’ve entered on your Self Assessment is correct before pressing the submit button online.
After you’ve done so, HMRC will tell you how much you owe, also referred to as the “balancing payment”, and offer various ways in which you can pay it. The main way to pay is through Direct Debit or bank transfer. For other payment options, check the Gov.uk website.
Payments are due by the 31st of January at the end of every tax year in which they relate to. For example, for any tax due in the tax year of 2021/2022, you’ll be expected to make payments by January 31st 2023.
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We take the stress away from you
Here at Count, we pride ourselves on looking after our clients’ tax concerns. We’re experts in the industry and know just how to make your business life easier, so you can trust that your Self Assessment tax return process will more hassle-free than ever with our services. Speak to one of our knowledgeable advisors to see what we can do for you.