You can find out everything that you need to know about your Self-Assessment Tax Return by watching the video or reading the blog below.
You may need to submit a Self-Assessment Tax Return if you have self-employed earnings, income from property or untaxed income such as tips or commission.
It is better to finish your return early to avoid the last-minute rush at the end of January. The thought of sorting through your old receipts and working through confusing tax calculations can completely put you off, but were here to help.
What is a Self-Assessment Tax Return?
For most employees, tax is automatically deducted through your PAYE but when you are self employed it is up to you to notify HMRC. Through your Self-Assessment Tax Return you’ll let HMRC know what you have earned in the year and the tax you owe.
You will need to submit a self-assessment if you had:
- Income from self-employment that’s more than £1,000
- More than £2,500 income from rental property
- More than £2,500 on other untaxed income, such as tips or commission
- Income from savings or investments of £10,000 or more
- Income from dividends from shares of £10,000 or more
- Profits liable to capital gains tax
You’ll also need to complete a return if:
- You were a company director; or
- If you claimed child benefit, and you or your partner’s income was more than £50,000.
What do you need to do?
Step 1 is to register with HMRC
When you have registered, you’ll receive a unique tax payer reference number which you will use to sign up to HMRC for their online services. HMRC will then send you a pin shortly after in the post, which you can use to access the online services and file your return.
Completing your return
Each personal tax return year ends on the 5 April.
The deadline for paper returns each year is 31 October following the year-end, and online returns must be filed by 31 January, ie nearly ten months after the year end.
If you are registered as self-employed, you’ll need the following records:
- All your business expenses
- Records of any sales or income
- PAYE records if applicable
- VAT records if applicable
- Records of your personal income
If your employed or a company director for a limited company then you may also need:
- P45, P60 and P11D forms
- Certificates from a taxed award scheme
- Information about any redundancy or termination payments
- Information about income and benefits of your job
When do I pay my bill?
This will include your first payment on account towards the following year, if applicable, and any tax that you might owe from the previous tax year.
The deadline for the payment is the same deadline for submitting the return, by midnight on the 31 January.
What are the penalties if your late?
You will be fined if you submit late, even if you are only one minute after the deadline at midnight on the 31 January.
The initial penalty is £100 if you are up to three months late, but this will then increase the longer you leave it.
After three months, ie from 1 May – you will receive additional penalties of £10 per day, with a maximum of £900.
After six months – a further penalty of 5% of the tax due, or £300 charge. Whichever is higher.
After twelve months – another 5% or £300 charge, again depending on which is higher.
If you pay your tax bill late then you could face additional penalties of 5% of the unpaid tax at 30 days, six months and twelve months.
However, if you filed your tax return late but you do have good reason, then you’re able to appeal the penalty. The circumstances can include:
- If a partner or close relative passed away prior to the deadline
- Serious illness
- Emergency hospital stay
- Unexpected delay in post
- An IT, hardware or software failure
- External causes such as fire, flood or theft preventing you from completing the return
- Issues with HMRC
It has to be a genuine, serious reason. You can’t just claim the dog ate it.
What are the common mistakes?
Here are some of the common mistakes that people make when filing their return and ways to avoid them.
- Missing out on tax relief
Remember to make sure that you are claiming back tax relief where you are eligible for it. This includes charitable donations that you have made, pension contributions and work expenses.
- Not declaring all your income
All of your taxable income needs to be deaired on your self-assessment, including:
- Pension payments
- Interest on your bank account
- Capital gains
- Rent from a buy-to-let property
- Late or incorrect filings
Rushing through your numbers last minute increases the chances of you either overlooking something or putting something in wrong. If you have realised that you have made a mistake then you can amend your tax return within the first year of the 31 January deadline.
There is still a chance that you could face penalties if HMRC decide that you did not take reasonable care in providing the right information.
Alternatively, to avoid any of these issues from the very start, speak to an accountant to ensure that it is all completed accurately and on time.
I hope you found this useful. If you would like to know more, please get in touch using the details below.