Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax, which is usually deducted automatically from wages, however self-employed workers must report it in a tax return.
It is important to understand how to prepare for a Self-Assessment tax return, which can be quite daunting, so you can file it correctly and avoid penalty charges.
If you’ve never submitted a tax return before, you will need to register for Self-Assessment, after which you will be sent your Unique Taxpayer Reference (UTR). The letter containing you UTR has instructions on how to set up a Government Gateway account and submit your Self-Assessment form online. The tax return is submitted for tax years (running from 06 April to 05 April following year) not calendar years, as explained below:
- need to register for Self-Assessment by 5 October if you’ve never submitted a return before
- submit your return by midnight 31 October if filing a paper tax return
- submit your return by midnight 31 January if filing online
- pay the tax you owe by midnight 31 January
Failing to meet these deadlines, can end up in penalty fees and interest on late payment. For tax year 2020/ 2021 there is an extension to submit the Self-Assessment tax return until 28th February 2022.
Before you start filling the form, you must have the following documents:
- Unique Taxpayer Reference (UTR)
- National Insurance number
- Details of your income from self-employment
- Record of expenses relating to self-employment
- contributions to charity or pensions that might be eligible for tax relief
- P60 or other records showing how much income you received that you have already paid tax on.
No expenses can be claimed if you claim the £1,000 tax-free trading allowance.
If your annual turnover is below £85,000, you can just enter your total expenses without having to itemise them. However if your turnover is more than £85,000, individual amount for each kind of expenses needs to be entered, plus a total at the end.
The different expenses you can include if you’re self-employed are:
- cost of stock bought for resale
- cost of equipment used at work
- wages, salaries and other staff costs
- payments to subcontractors for the the construction industry
- vehicle and travel expenses
- work building costs (including rent, power and insurance)
- repairs and maintenance for work buildings and vehicles
- office costs (including internet access, phones and stationery)
- advertising and business entertainment costs
- interest on loans
- bank, credit card and other financial charges
- accountancy, legal and other professional costs.
There is no need to send in proof of these expenses, such as receipts, when you submit your Self Assessment tax return. Records of these expenses need to be kept for five years after you submit your return for that tax year in case HMRC ask you to produce them.
We have partnered with Gorilla Accounting who specialise in this and make the process nice and easy for you. To proceed with this, all you will need to do, is complete the online questionnaire https://gorillaaccounting.com/personal-tax-questionnaire/ and state the Company Name as “Rocket PAYE”. If you do not state the company name as “Rocket PAYE”, you won’t get the fantastic price we quoted earlier of £100 +VAT. Once this questionnaire has been completed, a member of the Gorilla accounts team will be in touch to talk through this and compile the return.