Like millions of self-employed in the UK, you are probably looking forward to the festive season and spending time with your friends and family members. It is a time to relax and unwind, but if you haven’t started planning for your self-assessment tax return, now is the time to do so, to stop you having a stressful holiday.
New to self-assessment?
You will be required to submit a self-assessment tax return if you meet certain criteria. For example: you were self-employed or you got £2,500 or more in untaxed income or your income from savings and investments was £10,000 or more before tax. To check if you need to complete a tax return, please check the full list on the HMRC website.
The quickest and easiest way to complete your tax return is by doing it online. To do, this you need to enrol for HMRC online service. Once you have completed the registration process, HMRC will forward you a PIN code by post which you will need to access the online system. You cannot complete your tax return online without registering for online service.
You may need to use an alternative system for the self-assessment tax return:
- For a partnership
- For a trust or estate
- If you lived abroad as a non-resident
- If you get income from a trust, you’re a Lloyds underwriter or you are a religious minister
Important dates you need to be aware of:
- 5 October 2017 – Register for Self Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership
- Midnight 31 October 2017- Paper tax returns
- Midnight 31 January 2018- Online tax returns
- Midnight 31 January 2018- Pay the tax you owe
- 31 July 2018- Second payment on account
Completing a tax return can be tricky and it can be easy to make mistakes. Here are the most common mistakes we see:
- Late submission: in 2016, 870,000 failed to submit their personal tax return by the deadline. Reasons given for this included; lost information, disorganisation and personal emergencies.
- Inaccuracy or omission of figures: if a tax return is submitted that contains these errors, and HMRC take the view it was done on purpose, penalties can be applied.
- Not including all sources of income: if you have additional sources of income, they have to be included on the ‘supplementary pages’ section. Additional sources of income include things like life insurance gains and income from property.
- Using the wrong UTR number: using the incorrect UTR number can result in delays.
- Claiming for incorrect expenses: not every expense can be claimed for. You must only claim for expenses that deemed as ‘allowable’ by HMRC.
Tips for a stress free self-assessment
To help make submitting your tax return as stress-free as possible, we’ve put together these tips:
- First, check with HMRC that you need to complete a tax return. It may be that you don’t meet the self-assessment criteria laid out by HMRC (though this is very rare)
- Complete the registration process as soon as you can. Registration can take up to three weeks
- Put enough money aside to cover the payments on account
- Familiarise yourself with what expense is deemed an allowable expense
- Keep all your paperwork together and in date order. This makes sorting through it easier and it will also save you valuable time
- Include all your sources of income
- Double check everything before hitting the submit button
- Get expert advice from an accountant will save you time and money. They will also be able to advise you what is classed as an allowable expense and what is not.
Benefits of getting it done early
You may receive a penalty if you fail to submit your self-assessment tax return by the deadline and fail to pay the tax due. A £100 penalty will be applied if your tax return is up to three months late or if you pay your tax bill late.
You could also be charged further penalties for late submission:
- 3 months late – £10 a day fine. Up to a maximum of £900 (90 days) for every day its late
- 6 months late – £300 fine or 5% of tax owing (whichever is greater)
- 12 months late – a further £300 fine or 5% of tax owing (again whichever is greater)
You will face the following charges for late payment of tax:
- 30 days late – 5% charge on tax owing on that day
- 6 months late – 5% charge on tax owing on that day
- 12 months late – 5% charge on tax owing on that day
Interest will be charged on the tax owing plus the amount added in charges at a rate of 3%.
The deadline for submitting your self-assessment tax return is only weeks away, but there is still time to get it ready and filled on time. Following our advice above and seeking the assistance of an experienced accountant will mean you can get it done without losing any sleep.