If you’re self-employed, then you probably already know just how many hoops you need to jump through, the paperwork you have to file and the rules you have to follow. Just one of those things is a self-assessment tax return – which HMRC requires you to fill in once a year and file with them. This can be a bit of a confusing process, especially if you’ve never done it before, which is why many people put it off until the last minute – meaning a flurry of activity and confusion come deadline time. So this year we want to help you get ahead of the curve and not only understand what self-assessment is, but how to fill it in and file it properly, so you can be confident that you’re reporting the right thing, and none of the dreaded brown HMRC envelopes will hit your doormat.
Registering for Self-Assessment
If you’ve not done it before, the very first thing you need to do is register. This is as simple as filling in a form with HMRC. Once you’ve done this, you’ll be given a UTR (Unique Taxpayer Reference), and you will be incited to enrol for the self-assessment online service. HMRC will send you an activation code in around 10 days, and once you enter it into the portal you will be able to access your online account and manage your self-assessment directly from there. This online service is much easier to use than the old paper forms, so we encourage all self-employed business owners to use this instead of hardcopy forms.
Filling in the Form
While it might seem daunting, the self-assessment form itself is actually quite simple. All you really need to do is prepare properly, and make sure you have all the right information to hand. This means having your UTR number, accurate figures of income and expenses, and national insurance numbers. This can all be done easily if you are organised throughout the year (see the below section on record keeping). There is even online software that helps you record all of this information and see it in a snapshot, ready to fill in your form.
When you sit down to it, you will need to put in all figures regarding expenses and income, and the amount you have to pay in NI. You have to pay £6205 if you are a Class 2 or £8424 if you are Class 4. Also, keep in mind that if it is your first time filing a tax return and your tax for the next year exceeds £1000, you’ll need to put in an estimate of your income for the year to follow to make payments for the upcoming year. Eventually, the amount you owe would become half of the tax bill. Once you have entered this information, all calculations will show the due amount and the National Insurance contributions and other amounts. If you’re not sure what to do, just ask your accountant.
Your self-assessment tax return needs to be completed and filed at the end of the tax year. For online returns, this means the 31st of January next year, and for physical returns it’s the 31st October for the current year.
This makes more sense when you see it in practice, so let’s look at an example. If you’re submitting a tax return for the year 2020/21, it has to be completed by the 31st of October, 2020 should you choose to go with the hardcopy option. If you are moving forward with the online process, you have an extended deadline of 31st January 2021. This is the maximum time by which you need to submit all returns. If in case you miss the deadline, then you’ll get a rather expensive penalty. There is a whole mechanism for these penalties, which starts at £100 if you file your tax return 3 months after the deadline, and then goes up from there, applying a hefty interest charge onto the fines as well. You can get a waiver on the penalties, but only if you have a legitimate reason for not filing on time (see what they are here).
One of the sections we get asked about most is expenses, and specifically what you are allowed to claim as a self-employed person. When filling in your self-assessment, you will need to make sure you add the correct figures for any expenses your business bears. Small businesses can claim got a number of things, including:
- Operational overheads
- Fuel costs
- Parking tickets
- Utility bills
- Bus/train tickets
- Uniform expenses
- Staffing costs
We’ve written in detail about expenses as self-employed person before, so if you want more information just read this article about what expenses you can claim.
Record keeping might not be the most exciting thing in the world, but as a business owner of any size it’s important, as you have a lot of legal obligations on your shoulders when it comes to paperwork. So when in doubt, keep a solid and organised record of everything from the word go. Not only does this mean you have any information HMRC might ask to see readily available, but it makes the whole process of self-assessment ridiculously simple. It doesn’t matter what your business looks like – keep everything, including:
- Invoices, no matter how big or small
- Business receipts
- Formal contracts
- Published accounts
- Official notices
Luckily, modern technology means you don’t have to keep a filing cabinet full of paperwork – there are plenty of software programmes that can keep all of this digitally for you.
Look for Extra Pages
The basic, entry-level self-assessment form applied to all tax payers in the UK. But there are a number of things that could mean your situation is different, and therefore you need to fill in some extra information. This means you will need extra pages, which is a very common thing. You can get the most common ones – SA900 (trust and estate tax return) and the SA904 (trust and estate foreign) – and more directly from HMRC. But if you do need these extra pages, we recommend you chat to an accountant to ensure they are needed and filled in correctly before submitting them, as these can have some major implications if you get it wrong.
Review, Review, Review
This rule applies to any form you fill in, but particularly this one. Never submit your online or physical self-assessment forms without a final check. We recommend you walk away from the form for a day and come back to it with fresh eyes, as this gives you a better chance of spotting errors. Review your documents, as there could be some serious issues if anything goes wrong – from just paying more tax than you need to to being fined by HMRC. Make sure your forms contain all the right documents and information, and that it’s all correct and up to date. If you have any questions about the form before you submit it, you can either contact HMRC directly (if you like waiting on the phone), or reach out to an accountant for support.
At Cove Accountancy Services, we work with businesses of all shapes and sizes, from the self-employed one-man-band up to larger businesses with multiple employees. We have a detailed understanding of what HMRC wants, and can not only help you fill in your self-assessment forms, but show you some tricks to save you money as well. If you would like more information, all you need to do is give us a call and book your free consultation. We can’t wait to hear from you.