First things first…
If this is your first year of filing a tax return, you’ll have to register your business with HMRC before you can start the Self Assessment process – and you’ll need your activation PIN and Unique Tax Reference (UTR) from them in order to complete and submit a return.
If you haven’t already done this, act fast! It may take more than a week for HMRC to send you the information you require by post (they can’t give it to you over the phone), so you’ll risk being unable to file by 31st January if you leave it too long to register.
Include all your information
As a basic rule, any money you’ve received, or earned, from pretty much anywhere, has to be included in your Self Assessment tax return. You’ll need to include information such as:
- The P60 form showing your salary and tax for the year to 5th April 2017 (if you have a job and you’re paid wages – even if you’re a director of your own limited company – your employer should have given you this form). If your employer also gave you a form P11D showing any expenses or benefits you received, you need that too.
- If you have a bank account that pays you interest, you need to know how much interest you received in the tax year to 5th April 2017 and how much tax was taken off that. Don’t include any ISAs you may have (because interest on an ISA is free of tax) and unfortunately you can’t claim tax relief on bank interest you had to pay on a non-business bank account. However, if you’re the director of a limited company, make sure you don’t put interest on the company’s bank account into your own tax return – that goes on the company’s tax return.
- If you’re a sole trader, or in partnership, you need to know your business’s income and expenses.
- You might also have received dividends on shares you own, whether these are in your own company or another. You’ll need to include the dividend income on your tax return.
Follow the rules
There are many rules and regulations when it comes to tax, so make sure you follow these to the letter when completing your tax return. These rules vary depending on your employment status, so it’s important you do your research. Contractors, for instance, should be aware of the implications of IR35. For sole traders, there is need to be very careful when you’re adding up your income and expenses for your sole trader or partnership accounts. Unless you use the cash basis to prepare your accounts, you have to count income depending on when you did the work – not when the customer paid you.
Furthermore, make sure that you’re fully up-to-speed with the rules surrounding business expenses and what you can (and can’t) claim – especially with regard to travel, accommodation, food and drink, entertaining, clothing and the business use of your home. You can do this by checking your proposed expenses against the info on HMRC’s website, or use another reputable source of expenses information for sole traders, partnerships and limited companies.
Double check the forms – and submit them correctly
When submitting a tax return online, you will have to complete everything and file the form before midnight on 31st January 2018 otherwise HMRC will issue an automatic fine of £100 – and this applies if you’re even a day late and even if you don’t actually owe any tax.
There are a number of ways to complete your return, such as:
- Filling in the Self Assessment forms on HMRC’s website and submitting them there once they’re complete
- Using alternative technology – for example, sole traders, and directors of Limited Companies, can complete and file their Self Assessment from directly within FreeAgent, without needing to use HMRC’s website
- Using specialist software such as TaxCalc to help fill in your tax return, before you then use HMRC online to submit the forms
Make sure you complete every section correctly and leave plenty of time to thoroughly double-check everything before you submit it. Remember that a single, simple mistake or omission (such as not ticking the confirmation box at the end) could result in your tax return being rejected by HMRC and you being fined.
If you don’t feel 100% confident in submitting your tax return, it may be a good idea to speak to a qualified accountant who will be able to check it for errors. Just bear in mind that it’s likely to be quite expensive to hire the services of an accountant at this very late stage – so be prepared to pay a high premium if you have to find one from scratch.
If you find yourself struggling to complete your tax return on time, don’t do a poor, rush job just to get it submitted. If you miss the deadline, the worst that can happen in the first instance is that HMRC will fine you £100 for failing to file on time and you’ll also be charged interest for paying your tax late – you won’t automatically get a visit from a tax inspector or face immediate prosecution by the authorities. And you can still submit your tax return after the deadline has passed.
Just don’t get lulled into a false sense of security. HMRC starts increasing the penalties for late filing if you leave it too long, and there are also additional charges and interest to pay when it comes to actually paying your tax bill late. Dawdle too long and those penalties will quickly start to add up!
Completing a tax return can seem like a daunting process but don’t let it overwhelm you. Make use of the available tools and useful information, follow the rules and if you get too stuck, don’t forget that you can always ask a friendly accountant for help.
Emily Coltman FCA is Chief Accountant to FreeAgent which provides cloud accounting software for freelancers, contractors and micro-businesses. Find out more about FreeAgent