A Beginners guide to completing your Self-Assessment

Tax season can be a daunting time for many. That’s why we put together this comprehensive guide, walking you through the process of self-assessment, providing you with the latest information for the current tax year.

Our goal here is to make self-assessment less intimidating and more manageable, helping you stay on the right side of HM Revenue and Customs (HMRC) while ensuring you pay the right amount of tax.

What is self-assessment?

Self-assessment is a way of reporting your income and paying tax to HMRC.

There are two ways you can submit your tax return:

  • Online
  • By post

Who needs to complete a Self-Assessment?

Self-Employed Individuals: If you run your own business or work as a sole trader, your income won’t be taxed at source, so you must complete a self-assessment.

Landlords: If you earn rental income from property you own, you’ll need to report this income through self-assessment.

Individuals with multiple Income sources: If you have multiple sources of income, such as earnings from employment, self-employment, and dividends, you may need to complete a self-assessment to ensure you’re paying the right amount of tax.

Partners in a Business Partnership: Partners in a business partnership are considered self-employed, and they must report their share of the partnership’s profits through self-assessment.

Company Directors: Company directors must complete self-assessment even if they have tax deducted at source from their salary, as they often have additional income sources and responsibilities.

Individuals with Taxable Income beyond Employment: This includes individuals with significant savings interest, investment income, foreign income, and other taxable income not taxed at source.

You can find out exactly who needs to complete a self-assessment tax return on the GOV.UK website.


Key dates you need to remember!

Understanding the key dates is crucial to avoid penalties and interest charges. Here are the critical dates you need to know:

April 6th: The beginning of the UK tax year, which runs until April 5th of the following year.

October 5th: The deadline for registering for self-assessment. You should do this if you meet any of the criteria mentioned above.

October 31st (for paper returns) or January 31st (for online returns): These are the deadlines for submitting your self-assessment tax return. The deadline for paper returns is earlier, and it’s recommended to file online, as it’s more efficient and offers a later deadline.

January 31st: The deadline for paying any tax you owe for the previous tax year. This includes the balancing payment for the previous year and the first payment on account for the current year.

April 5th: This is the deadline for making any amendments to your tax return for the previous tax year. It’s important to make corrections if you realize you made a mistake.

Penalties for late Self-Assessment Tax Returns

Filing your self-assessment tax return after the deadlines can result in penalties and additional charges. It’s crucial to understand these penalties to avoid unnecessary financial consequences.

Late Filing Penalties

Late Submission: If you miss the deadline for submitting your self-assessment tax return, you will be charged a penalty of £100. This penalty is issued even if you don’t owe any tax.

More than Three Months Late: If your tax return is more than three months late, you could be charged an additional £10 per day, up to a maximum of £900. This daily penalty accrues for each day your return is overdue.

Late Payment Penalties

Apart from late filing penalties, there are also penalties for late payment of tax owed. If you are late paying your tax, you will be charged as follows:

  • 5% of the Tax Unpaid After 30 Days: If you haven’t paid the tax you owe within 30 days of the deadline, you will be charged an additional 5% of the tax unpaid at this point.
  • Another 5% of the Tax Unpaid After 6 Months: If you still haven’t paid after 6 months, another 5% of the outstanding tax will be added to your penalties.
  • Another 5% of the Tax Unpaid After 12 Months: If you delay your tax payment for a full year or more, an additional 5% of the tax unpaid will be charged.

These penalties can add up significantly, so it’s essential to pay your tax on time to avoid them.

How much would my penalty be?

If you have submitted your tax return late and want to estimate the penalty you might face, you can use the GOV.UK penalty calculator. This tool will help you get an idea of the potential financial consequences of a late submission.

Let’s move on to a Step-by-Step guide to Self-Assessment

Now that you understand what self-assessment is and who needs to complete it, let’s take a step-by-step journey through the process:

Step 1: Register for Self-Assessment with HMRC

If you’re new to self-assessment, the first step is to register with HMRC. You must do this by October 5th of the tax year in which you need to file. You can register online on the HMRC website or call the helpline for assistance.

Step 2: Gather your Documents

Collect all the necessary documents and records. This includes details of your income, expenses, and any relevant receipts, invoices, and bank statements. Make sure to keep these records organized throughout the tax year to streamline this process.

Step 3: Calculate your Income

Now comes the crunch. Calculate your total income. This could include income from employment, self-employment, rental income, dividends, interest, and other sources.

Step 4: Deduct Allowable Expenses

Once you’ve determined your total income, you can deduct allowable expenses. These are the costs incurred in the course of running your business or generating income. They could include office rent, travel expenses, equipment, and more. Be diligent in ensuring you only claim legitimate expenses to avoid any issues with HMRC.

Step 5: Complete your Tax Return

You have two options for completing your self-assessment tax return:

Option 1: Paper Return

Filling out a paper return can be time-consuming and increases the likelihood of errors. The deadline for paper returns is October 31st, which is earlier than the online deadline.

Option 2: Online Return

Using HMRC’s online service is faster, more convenient, and typically more accurate. You have until January 31st to submit your return online. Registering for online self-assessment can take some time, so don’t wait until the last minute.

When completing your tax return online, you’ll be asked a series of questions about your income, expenses, and any other relevant details. Take your time to ensure the information is accurate.

Step 6: Pay your Tax Bill

If you owe tax for the tax year, HMRC will calculate this for you when you submit your return. The deadline for paying any tax owed is January 31st. It’s essential to meet this deadline to avoid penalties and interest charges.

Step 7: Record-Keeping

After you’ve filed your tax return, make sure to keep copies of all your records for at least six years. HMRC may request to see these documents as part of an audit, and having them on hand will make the process much smoother.

Now that we’ve gone through the steps, let’s look at some helpful tips to plan for your self-assessment effectively:

1. Stay organized

Effective record-keeping is the key to a stress-free self-assessment process. Use accounting software, spreadsheets, or dedicated apps to track your income and expenses throughout the year. Store receipts, invoices, and any other supporting documents in an organized manner.

2. Set aside Funds

If you know you’ll owe tax, start saving for it throughout the year. Open a separate bank account to set aside a portion of your earnings for your tax bill. This will prevent financial strain when it’s time to pay.

3. Consult with a Professional

If you’re unsure about any aspect of your tax return or have complex financial circumstances, consider consulting with a tax professional. Here at AccNet, we can provide valuable advice, help you identify tax-saving opportunities, and ensure your return is accurate.

4. Keep updating yourself!

The tax system is complex and subject to changes. Stay informed about the latest tax regulations and any changes in tax laws. The GOV.UK website and various reputable financial news sources are excellent resources to keep you updated.

5. Learn from past Returns

If this isn’t your first self-assessment rodeo, reflect on your past returns. Are there areas where you consistently make mistakes or oversights? Use this information to improve your processes for future returns.

To help you correctly file your tax return with no unnecessary stress, it’s worth investing in a reliable Accountancy firm such as AccNet. Our team of experts specializes in tax matters and can provide you with guidance, ensuring your tax return is submitted on time, avoiding penalties.

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