Are you self-employed? Do you understand self-assessment?
According to the Office for National Statistics there were nearly 150,000 new self-employed people in the last quarter totaling 11.2 million who now need to file a tax return. However the HMRC stated that more than 750,000 of these people missed the deadline last year confirming self-assessment is the bane of many self-employed. Here at First Call Financials we are on hand to help with all the confusion and assist you in avoiding any nasty fines.
What is Self-Assessment?
Self-assessment is fast approaching and if you have not already submitted a paper tax return you must submit the online alternative by 31st January.
As an individual tax payer it is your responsibility to keep up with all your legal and tax obligations ensuring that you complete and submit a self-assessment tax return and pay any outstanding tax. We understand that it can often become a daunting prospect, especially the first time, but you shouldn’t worry yourself too much. As long as you stick to deadlines and read through the forms properly answering honestly you’ll be fine. Any missed deadlines will result in penalties regardless of your excuses; the HMRC definitely will not accept the age old excuse “my dog ate my tax return”.
Register with HMRC
It may sound like an obvious point to make but it is often these we forget about.
You must have registered by 5th October following the end of the tax year you need to send a tax return for. So in this instance you should have registered by 5th October 2014 in order to send a 2013-2014 tax return. If you have not done so you may be faced with a penalty. For more information on late registration and possible penalties take a look at this document provided by HM Revenue and Customs.
If you are registering for the first time you will be given a unique taxpayer reference (UTR) number. Make sure you keep hold of this for future reference and your self-assessment submissions to come. You will also need to have your National Insurance number and any other business details (address & date you started self-employment) handy when you register. How you register will also depend on your circumstances, so whether you’re a new sole trader, existing sole trader or joining a business partnership. Take a look here for more information on how to register for each situation. Finally you will also need to sign up for a Government Gateway account in order to file your tax return.
Once registered as well as submitting your self-assessment tax returns you will also be able to:
- View payments made
- View past statements
- Pay any tax due via Direct Debit
- Claim repayment that you are owed.
Keep Track of Your Records
You are in fact legally obliged to keep the right records as receipts, invoices, and bank statements. This means filing them correctly too. You may even wish to consider investing in bookkeeping software to help you manage said records.
For the self-assessment you should collect financial records for the appropriate year including any relevant forms such as P60, P45, P11D, PAYE notices of coding, as well as your profile or loss accounts, business receipts, bank statements, and dividend counterfoils etc. Finally you will need any personal pension contribution certificates. Note that you should always keep a record of your tax return for at least 5 years after the filing date.
Deadlines and Penalties
You must submit your online tax return before midnight on 31st January or you will face an immediate £100 penalty. If you are faced with a penalty it is vital that you pay the HMRC on time or else you will continue to be fined resulting in a hefty unwanted sum of money.
If you still have tax to pay after you have made payments on your accounts you will be faced with a ‘balancing payment’. This is the balance of tax you owe for the previous tax year, you may have even paid some already, and must also be paid by midnight on 31st January after the end of the tax year. So the 2013-2014 tax year ending 5th April will be due on 31st January 2015. You will also have to pay the first of 2 advance payments for the current tax year by the same deadline; this sum will depend on the amount of tax due and the kind of income you receive. The final deadline for the second of these payments is due before midnight on 31st July.
Need a Hand?
If you need additional information and advice concerning self-assessment for the self-employed give our team a call on 0117 379 0810. Alternatively visit the HMRC website for further information and guidelines when filling out the form.
Latest posts by Fran Tyler (see all)
- Revealed – the truth behind 10 Auto Enrolment myths - October 14, 2015
- Is your business ready for its first employee? - September 25, 2015
- How Much Do You Know About What You Can and Can’t Claim? - June 15, 2015
This post was written by Fran Tyler