If you run your own business, earn capital gains or otherwise have income apart from salaries and wages, you will need to submit a Self Assessment tax return.
Paperwork is no one’s favourite activity, but as long as you are prepared in advance to file your returns, it does not have to be onerous. In fact, it is a hassle you can minimise when the deadline is around the corner.
To help you out, we have compiled some tips on staying on top of things and submitting accurate Self Assessment tax returns, especially now that the deadline is looming. Here is what you need to do:
1. Set up your online account and UTR number
All Self Assessment tax filers need a one-time unique taxpayer reference (UTR) number. It can take several days to receive the number and its activation code in your mail after you have made the request online, so to be safe, apply for it at least a month in advance. Contact us if you need help with this, and one of the Bradleys’ accountants will help you.
2. Have all key information ready
As anyone who has done it will tell you, trying to locate key documents at the last minute can be a nightmare. You are much better off gathering your information well in advance, including:
- P11, P45 and P60
- Gift aid payments
- Dividend income records
- Annual pension statement
- Business expense receipts
- Interest earned on savings
- Records of rent paid by tenants (in case you are a landlord)
3. Keep all your documents on file
HMRC requires you to keep all business-related documents on file for a period of six years. This is necessary in case the taxman decides to conduct an audit. Therefore, be organised with your paperwork.
4. Know which taxes to pay
There are a variety of taxes you may have to pay as part of your Self Assessment returns, including capital gains tax, income tax from dividend earnings and national insurance. It all depends on how much you earn and from which sources. Again – if you are unsure, speak to one of our experienced Self Assessment tax return accountants!
5. Know which business expenses to claim
HMRC is very clear that only those expenses directly related to your business can be claimed back, including salaries and wages, rent and electricity/water bills for office premises, purchase of goods for resale, accountancy fees and so on. You can also write off fixed costs (such as for fixtures or computer equipment) over eight years through capital allowances.
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6. Claim the appropriate tax relief (and know the time limits involved)
Tax reliefs are exemptions on your tax bill that may either be applied automatically or that you will have to apply for separately. These could take the form of reduced taxes on expenses for someone running their own business or tax relief for contributions to things like pensions. Some tax reliefs you could potentially be eligible for include:
- Investor tax relief
- Savings rate band
- Pension tax relief
- Starting rate band
- Personal allowance
- Dividend allowance
- Marriage allowance
This is important because a reduced tax bill directly translates into more cash for your business – which is always a good thing when you are running your own business.
In this context, however, remember that there is a four-year time limit to submit tax relief claims, so be sure to review the last few years for potential expenses that can be claimed (including ones like third-level college fees).
7. Understand payments on account
According to HMRC rules, payments on account refer to you dividing your tax liability across the year by making two payments – one on January 31 to settle last year’s bill and pay part of this year’s bill and one on July 31.
However, if you have already paid more than 80% of the taxes you owe or your earlier Self Assessment tax bill was under £1000, you do not need to make payments on account.
8. Know the deadlines and penalties for missing them
You must submit your paper tax returns by midnight on October 31 and your online tax returns by midnight on January 31. You will also need to make the payments for both by January 31.
The HMRC is pretty strict about its penalties for missing deadlines – and they start adding up the day after the deadline. So be sure to clear all your dues on time.
And if you have a reasonable excuse, such as a natural calamity or hospitalisation, right before the deadline, be sure to apply for an exemption with the HMRC and then file your Self Assessment tax returns within two weeks of the excuse ceasing to apply.
9. Invest in a good accounting software
The HMRC heavily discourages paper returns, and they are much more prone to error anyway. Accounting software will automatically pull transaction records from your bank, scan receipts and prepare complete and accurate returns in a matter of minutes.
Plus, if you choose cloud-based software, you can access the data from anywhere and always have it stored securely. Ask your accountant about the best HMRC-compatible software and put down the money for it – it is an investment you will never regret.
Over to you
The Self Assessment tax filing deadline is January 31, 2023, so it might be worth getting your affairs sorted right now before it is too late. And if you do not want the stress of doing it all by yourself, that is OK – you have come to the right place.
We at Bradleys Accountants help the self-employed, company directors, and those receiving foreign incomes to file their Self Assessment taxes on time, and we can help you too. Trust us – delaying the filing process will only cause you frustration. With Bradleys, feel confident about your status — both tax owed and rebate amount. Contact us today!