In this guide we will go over everything you need to know about Self Assessment Tax Returns. We’ll cover all of your questions and provide you with all the information regarding who needs to file a self assessment, what documents you need, when the deadline is and what the penalties are if you miss it.
What is a Self Assessment Tax Return?
A self assessment tax return is one of the ways in which the taxman works out how much money individuals owe. Even those who’s income is already taxed by PAYE may have to file a tax return to declare any other income they receive.
When it comes to a self assessment tax return, you are required to submit the information to HMRC to tell them about any income you have received and what you’re spending to stay in business. The process is designed to be straightforward however it is very easy to make mistakes and this can often lead to your incurring more cost. If you need help with your self assessment tax return, CN Chartered Accountants have a tax department that can cover this for you.
What about if I pay PAYE tax?
PAYE tax is very different to the self assessment. With PAYE your tax is automatically deducted from wages, pensions and savings. However, if you receive additional income that is not using PAYE tax, then you will need to complete the self assessment return on the additional income.
Top Tip: Completing a self assessment requires you to have business records available, so if you are self employed make sure to keep and payment records close by so you have access to them when the time comes to complete your self assessment tax return.
What are the requirements for completing a self assessment tax return?
If you have received any untaxed income, then you may be required to complete a tax return.
Some of the most common situations you may receive untaxed income are:
- You are self employed
- You are a partner in business
- You are a company director and have income on which tax is due that is not taxed as Pay As You Earn (PAYE)
- You receive property income (through rental)
- You want to claim tax relief on employment expenses over £2,500 a year
- You have to pay a tax charge on your child benefit
- You have untaxed savings
- You have capital gains tax to pay
This is not a complete list and there may be other circumstances in which you need to file a self assessment tax return.
How to submit a self assessment tax return
To complete your self assessment tax return you will need to register online. You can do this on the government website. If you haven’t used the system before, you will need to registered by the 5th of October.
Once you have registered on the government website you will be give a Unique Taxpayer Reference Number and an activation number for your government gateway account. Once you have both of these you can sign in and complete your registration.
Now you’re set up, you will be able to submit your self assessment.
Top Tip: Make sure you have all the information you need available to you ahead of completing your tax return. This will include records of all your business incomings and outgoings, a list of all interest and dividends you have received and information about any benefits or State Pension.
There are lots of specific sections that you may or may not need to fill out when completing your self assessment tax return. For example, there are sections that relate to self-employment income and expenses, partnerships, UK property income, capital gains and more, however these may not all apply to you and therefore you won’t be required to fill them out.
Do I have to file my self assessment tax return online?
In short, no. You can still submit your application using paper. However it is generally recommended that you complete your self assessment online due to the time saving and ease of use.
Completing your assessment online means you don’t have to go through page upon page of documents and questions that don’t apply to you. Completing your form online also gives you later deadlines as you won’t have to send anything to HMRC, which also avoids any issues with postal delays.
All your tax will be calculated automatically once you have submitted your earnings online and you’ll also receive any payments that you are owed quicker than you would if you did use a paper submission.
Self assessment for people who are self-employed
One of the first decisions you will have to make when starting up your business is whether you are going to operate as a sole trader or set up as a limited company. Both of these have their pros and cons, and you will need to decide which is the best for your circumstances.
Whichever avenue you feel is best for your business, you need to make sure you understand what the self assessment requires from you. If you are struggling or would prefer to have it taken care of for you, CN have a team who can take care of all your self assessment needs. We can offer support and guidance or file your tax return for you, so you can get on with running your business.
What Documents do I need for a self assessment tax return?
In order for HMRC to calculate your tax they will need to have full records of your business finances. The most important documents you will need to keep hold of ahead of filing your self assessment are:
- Form P45, if you stopped working for an employer during the tax year.
- Form P60, showing what tax you’ve paid.
- Form P11D, if you get any “benefits in kind” like a company car.
- Records of any Taxed Award Schemes or redundancy payments.
- Other things to keep track of include extra income such as untaxed tips, incentive payments or benefits like meal vouchers.
Remember, it’s not just the self-employed who file a self assessment tax return online. If you’re claiming a tax rebate for expenses of over £2,500, you’ll need to use the system too.
What happens if my self assessment tax return is late?
HMRC are very clear when it comes to the deadline you need to meet for your self assessment tax return and there is little you can do to try and avoid the penalties. If you miss the deadline there are a number of penalties that you could be hit with:
- £100 automatic fine for filing even a single day late,
- £900 in penalties can stack up over the next three months
- £3,000 for each year you can’t provide the necessary records
If you need support submitting your documents, please don’t struggle alone. We’re here to take care of everything – from completing your tax return, through calculating any refunds due and even speaking to HMRC on your behalf.
How long does a self assessment tax return take?
The process of completing your self assessment tax return will vary from person to person depending on how many sources of income you need to file for.
However, HMRC will usually take between 8-12 weeks to sort out refunds, however there are things that can slow this down, one of which is people who having trouble using the system.
If I’m self employed, what are my allowed expenses?
If you’re self employed you have the unescapable cost of doing your work and running your business. This means that when you file your self assessment tax return each year, HMRC will reduce the amount of profit that you have to pay tax on. The rules will change depending on whether you’re a limited company or a sole trader and how you do your accounting.
However, there are areas of expenditure that come form part of your common allowable expenses, these include:
- Travel costs, whether in your own vehicle or by public transport.
- Specialised clothing, tools or equipment you need for your work.
- Any stock you buy to sell on.
- Household bills if you work from home
- Anything you’re spending on advertising or marketing.
You may also have items you use for personal and business use, such as a car or a phone. In these cases, you will only be allowed to claim for a proportion, depending on the business use you get out of them.