The self assessment tax return is a form you fill out to report your income and expenses. The requirement to submit a self-assessment tax applies to individuals, sole traders and partnerships.
Self-assessment tax return can be submitted electronically by filing it online or by paper return. If you are submitting a paper return, the filing deadline is 31 October. If you are filing electronically online, the deadline is 31 January. Tax owed must be paid by 31 January following the year of assessment.
To submit a self-assessment tax return, you must first tell HMRC that you are liable to submit a return. You can tell HMRC by phone or by completing a form SA1. Once HMRC is notified of your requirement to submit a tax return, you will be issued with a taxpayer unique tax reference commonly known as a UTR.
After you receive your UTR, you will have to decide whether you want to submit your tax return using a paper tax return or online. To submit your tax return using paper simply phone HMRC and you will be sent a paper self-assessment form to complete.
To submit your tax return online you would need to register an online account with HMRC. Once you register your account with HMRC, you will be sent login details which you can use to log into your account and file your tax return.
Submitting self assessment tax return online is the easiest option
For those who are new to filling in the self assessment tax return form, the easiest method is to do it online. HMRC has it own software online which any tax payer can use to file their tax return. However HMRC online software is only suitable for those who only need to file a basic tax return with only a few items of income and expenses.
You can also use commercial software to do it if you prefer. This can help to ensure that you are not making any mistakes. However, make sure you have all the information you need to submit the return.
If is difficult to cover all the information that every tax paye will need in order to prepare their self assessment tax return. This is due to the fact that every individua has their own sources of income and related expenditure. The following is a list of items that commonly required by an average tax payer in order to complete a return:
1. Total amount of sales receipts and expenses in the period.
2. Details of all dividend income received from investment in shares.
3. Details of interest received from bank and /or building society accounts.
4. State and other Pensions received
5. Income statements and expenditure invoices in respect of any rental property.
6. Amounts of any pension contribution made during the year
7. P60 / P45 in relation to any PAYE income during the year.
8. Details of any assets sold.
9. Details of any other income that you may have received during the period not mentioned above.
It is advisable to start preparing for filing your Self-Assessment as early as possible. The sooner you get started, the more time you have to avoid making any mistakes. Also, you can take your time and double-check any information you give.
Avoid late filing penalties
A late filing penalty occurs when your self assessment tax return is filed after the due date. The late filing penalty penalty can a fixed penalty or a percentage of the unpaid amount depending on how long overdue.
If a taxpayer fails to submit their tax return before the filing deadline, they will incur an automatic penalty of £100 pounds.
If the tax return is still not submitted within three months of the filing deadline, the penalty will be £10 per day for the next 90 days or until submitted.
If the tax return is six months late, there will be additional penalty of 5% of tax due or £300, whichever one is higher. If the tax return is 12 months late, there would be another penalty of 5% or £300, whichever is greater.
An individual can appeal a late filing penalty provided they have a reasonable excuse for not submitting their tax return on time. HMRC will consider each appeal decide whether the reason for late filing is reasonable or not.
Mistakes to avoid on your self-assessment tax return
It is important to avoid making the following mistakes when completing your Self-Assessment tax return. You could end up with fines, penalties and a large tax bill if you fail to make the appropriate claims and claiming the wrong tax relief.
Firstly, it is important to register with the HMRC in advance. Registration can take several weeks during busy periods. This allows you to avoid any unnecessary penalties if you miss the deadline.
Also, don’t forget to record all your income and expenses. Keep these records for at least five years. Use them to cross reference with your bank statements and you should be able to get a clear idea of how your business has performed.
There are also plenty of tax free allowances available to individuals. Some are not automatically applied, so you should be sure to research them thoroughly.
Another common mistake is omitting the most important expenses. You should be able to claim capital allowances on fixed assets, essential equipment, home office costs and so on.
Using software for self assessment tax returns
If you are a self-employed person, you’ll be aware of the importance of submitting a Self Assessment tax return each year. This can be done by completing an online form or submitting it through an accountant. There are also software programs that can help.
For those who are unfamiliar with self-assessment tax returns, it can seem complicated. To help, HMRC has introduced a simple tool that can assist you in determining your status.
Using a self assessment tax return software can help you avoid mistakes and save time. It can also help you estimate the tax that you owe. Many of these software products have free invoicing capabilities, which can help to keep your cash flow healthy.
While most people only need to complete part of their tax return, it’s important to make sure that they enter all the necessary information correctly. The software can help, as it generates prompts if anything looks off.
Frequently Asked Questions (FAQ)
1. What is a self-assessment tax return?
A self-assessment tax return is a system used by tax authorities to collect income tax. Taxpayers fill out a form detailing their income, capital gains, and allowances, which is then used to calculate the amount of tax owed.
2. Who needs to complete a self-assessment tax return?
Typically, individuals who are self-employed, partners in a business, or receiving income from sources not subject to withholding taxes need to complete a self-assessment tax return. If you’re uncertain whether you need to file a return, it’s best to check with your local tax authority or a tax professional.
3. How do you register for self-assessment?
You typically register for self-assessment through your tax authority’s website or office. You may need to provide information such as your name, address, National Insurance number (or equivalent), and details about your income.
4. When are self-assessment tax returns due?
The deadline for self-assessment tax returns varies by tax authority. In the UK, the deadline is 31st October for paper returns and 31st January for online returns.
5. What information do you need for your self-assessment tax return?
You’ll need various pieces of information, including personal details (like your National Insurance number), income from employment or self-employment, details of any benefits received, income from rental properties, and information about any other income you’ve received.
6. How do you pay your self-assessment tax bill?
Tax authorities offer various ways to pay your tax bill, including bank transfers, direct debits, or by check. Check with your tax authority for the most up-to-date methods.
7. What happens if you miss the self-assessment tax return deadline?
Missing the deadline can lead to penalties, and the longer you delay, the more penalties you’ll incur. If you have a reasonable excuse, you may be able to avoid penalties.
8. What can you claim on your self-assessment tax return?
You can usually claim expenses that are “wholly and exclusively” for your business, including office expenses, travel costs, staff costs, and advertising/marketing costs.
9. How can you amend your self-assessment tax return?
If you discover a mistake or omission in your self-assessment tax return, you can amend it within a certain timeframe. This is usually done through your online tax account or by submitting a new paper return.
Remember, these answers are general guidelines, and the specifics may vary based on your location and personal situation. Always consult with a tax professional if you’re unsure about anything.
Wilfred Alston is a seasoned accountant and prolific blog writer with over 20 years of experience in the fields of UK accounting, taxation, and finance. Throughout his extensive career, Wilfred has demonstrated a remarkable aptitude for translating complex financial concepts into accessible and insightful content for a diverse audience. With a solid foundation in accounting principles and a keen understanding of the intricacies of UK taxation laws, Wilfred has established himself as a trusted authority in his field. His in-depth knowledge and expertise have been instrumental in guiding individuals and businesses alike through the ever-evolving landscape of financial regulations and best practices. As a passionate advocate for financial literacy, Wilfred has made it his mission to demystify the world of finance through his writing. Through his engaging and informative blog posts, he empowers readers to make informed decisions about their finances, whether it's navigating tax obligations, optimizing investment strategies, or understanding the latest developments in accounting standards. Beyond his role as an accountant, Wilfred is a dedicated educator and mentor, sharing his wealth of knowledge through seminars, workshops, and guest lectures. He is committed to helping others develop the skills and confidence they need to take control of their financial futures. With a knack for breaking down complex topics with clarity and precision, Wilfred's writing has been featured in leading publications and websites across the UK. His insightful commentary and expert analysis have earned him a reputation as a go-to resource for anyone seeking reliable information and practical advice on matters of finance. In addition to his professional achievements, Wilfred is known for his integrity, professionalism, and commitment to excellence in everything he does. He approaches each project with enthusiasm and dedication, always striving to deliver content that informs, educates, and inspires his readers. As a respected voice in the world of accounting and finance, Wilfred Alston continues to make a lasting impact through his writing, helping individuals and businesses alike navigate the complexities of the financial world with confidence and clarity.
