Your self-assessment is one of the most important things to take into account when you become self-employed. It’s critical that the return is filled out correctly and submitted on time, as there are penalties otherwise, so you’ll want to get it right the first time around. As contractor accountants with years of experience, we can help. We’ve put together a self-assessment tax return guide with useful information for self-employed individuals, and we’re also able to assist with the return submission if you prefer. What is a Self-Assessment Tax Return? First of all, if you’re looking into becoming self-employed or are still a beginner, it’s crucial that you’re aware of which documents to fill out and why. After all, your taxes are deducted from your wages when you’re working for someone else – but, as soon as you become your own boss (even if on a part-time basis while you still work a more traditional job), you need to submit a self-assessment tax return. Since September 2017, some people who would normally submit a self assessment tax return are now eligible for Simple Assessment Tax, but you will know if this is you as you will receive a letter from HMRC. A self assessment tax return form, is a document used by HMRC to calculate how much tax you need to pay based on your income. You have to do this once a year, either filing the return online or sending it by post to HMRC. In the document, you must declare your taxable income and capital gains, as well as the allowances and reliefs you’re entitled to. Who Has to Submit a Self-Assessment Tax Return? According to HMRC, you have to submit a self-assessment return if, in the last tax year, which runs from 6 April to 5 April, you were a sole trader who earned over £1,000 or a partner in a business relationship. You may also need to submit a return if: You’re a company director with income that is not taxed under the PAYE (Pay As You Earn) scheme. You receive income from a trust, settlement or estate. You have untaxed income from renting out a property, tips or commission and foreign income. You have untaxed income from savings, investments and dividends. You or your partner receive child benefits and your income is more than £50,000. You have capital gains where you’ve sold or given assets worth £49,200 or more. You want to claim certain tax reliefs. There are other circumstances that may require the submission of a self-assessment tax return so, if you’d like to know if that is your case, talk to us. We’re sole trader accountants and can help out every step of the way. How to Register for Self-Assessment You have to register to submit the return, and there are different ways of doing it depending on whether you’re a sole trader, not self-employed or registering a partnership. If you’re self-employed or a sole trader, you will have to register for self-assessment and Class 2 National Insurance by 5 October in your business’ second tax year. This means that, if for example, you’ve started trading on 10 February 2021, the latest date to register was 5 October 2021. Some people may have sent online returns before. If you haven’t sent a return before, you can register online and will then receive a letter from HMRC with your UTR; after this, you can set up your account for the self-assessment service. You’ll receive an activation code that you will need to use to sign in. Important Dates to Know About In this self-assessment tax return guide, we also want to touch on key deadlines. When it comes to submissions, it’s crucial that you do it within the given timeline, since you’re at risk of being fined otherwise. The same goes for the money you owe – if you have to pay tax, make sure that you do it by the right deadline and, if you’re unable to, you need a reasonable excuse to avoid a penalty. Reasonable excuses may include a sudden death in the family right before the tax return or payment deadline, an unexpected stay in hospital, a serious illness, a software or hardware failure before, or when, you were dealing with your return, a natural disaster and postal delays you couldn’t have predicted. There are also some things that don’t count as reasonable excuses, including: relying on someone else to submit your return, failed payments due to lack of funds, finding the HMRC system too difficult to use, not getting a reminder from HMRC and making a mistake on the paperwork. Generally, you should make sure that your return or payment is sent by: Self-Assessment Tax Return Deadline Register for self-assessment 5 October 2021 Submit paper tax return 31 October 2021 (Midnight) Submit online tax return 31 January 2022 (Midnight) Pay the tax you owe to HMRC 31 January 2022 (Midnight) Penalties for Late Payments You should do all you can to avoid HMRC penalties for late or incorrect returns; if you miss your deadlines, you will have to pay a penalty of £100. If you’re more than three months late, you may have to pay an extra £10 a day up to a maximum of £900 and, if you’re six months late, you have to pay a further £300 or 5% of the tax due, whatever is higher (this is on top of the existing penalties). For those who are 12 months late, on top of the penalties highlighted above, they must pay an additional £300 fine or 5% of the tax owed and, if some cases, the fine corresponds to 100% of the amount of tax owed. You have 30 days to appeal with HMRC if you’ve been issued a penalty you don’t believe is correct, but you’ll need a reasonable excuse, as mentioned, to avoid a penalty. What is Required to Submit Your Return? When it’s time to prepare and submit your self-assessment tax return, there are a few documents and information
