Self Assessment Tax Return Help - FAQ’s
Answers to some of the most frequently asked questions about self assessment Tax Return...
- Do I need to complete a Self Assessment Tax Return?
- The most common reasons to fill out a Tax Return
- How do I pay Income Tax?
- What happens if I don’t pay my Corporation Tax on time?
- What are the deadlines for filing your Company Tax Return?
- What penalties could I face if I do not file my Company Tax return on time?
- If I’m self-employed what Tax Returns do I need to submit?
- What forms are included in a Self-Assessment Tax Return?
- What are the deadlines for sending my Self-Assessment Tax Return?
1. Do I need to complete a Self Assessment Tax Return?
If you do not pay PAYE i.e. are not a permanent employee you’ll need to fill out a self-assessment tax return. Also if you have a second income from overseas income, you’re a landlord or you have income from savings or investments. In a nutshell if you have any income that HRMC needs to know about you need to fill out a self-assessment form.
2. The most common reasons to fill out a Tax Return:
- If you are self-employed (including being in a partnership).
- If you are a company director or a minister of religion (bet you didn't know that).
Although, if HMRC ask you to complete a tax return you must do so. This will normally be to make sure you are paying the right tax and getting the right allowances.
If you don’t already complete a tax return form, you’ll need to do so if you receive any of the following:
- Income from savings and investments of £10,000 or more.
- Income from untaxed savings and investments of £2,500 or more.
- Income from property (before deducting allowable expenses) of £10,000 or more.
- You receive income from overseas
- Income from the estate of a deceased person on which tax is still due.
- If you or your partner receive child benefit and your income is over £50,000.
3. How do I pay Income Tax?
Income tax can be paid in various ways depending upon the type of income and whether you are employed, self-employed or not working. The different ways Income Tax is collected include:
PAYE (Pay- as- you-earn).
- Tax deducted ‘at source’. Whereby tax is deducted from your bank/building society interest before the interest is paid to you.
- In some cases, a one off payment.
If you are an employee or you receive a company or private pension, your employer or pension provider will deduct tax throughout the year using the tax code HM Revenue & Customs (HMRC) provides them. This is known at the Pay As You Earn system (PAYE).
If you are self-employed, you will be responsible for filling in a Self-Assessment Tax Return which can be done either online or by filling out a paper form. You will probably pay your income tax in two instalments plus a third final ‘balancing payment’
4. What happens if I don’t pay my Corporation Tax on time?
If you don’t pay your corporation tax on time, known as a late payment, or you do not pay enough (underpayment or non-payment), HMRC will charge your company interest. Late payment interest is charged from the day after the tax should have been paid (normally 9 months and one day after the end of the accounting period) until the date you pay it. Interest charges are automatic, however, interest is not charged on interest itself. Any late payment interest you pay to HMRC is deductible for tax purposes.
5. What are the deadlines for filing your Company Tax Return?
You must file your company tax return- which includes a company tax return form and other supporting documentation- within 12 months of the end of your companies corporation tax accounting period. Your company tax return filing deadline is known to HMRC as your ‘statutory filing date’. If you file your return late your company will be charged an automatic penalty, even if it does not owe any corporation tax.
6. What penalties could I face if I do not file my Company Tax return on time?
HMRC will usually send your company letter telling you that you need to file a company tax return. HMRC calls this letter a ‘Notice to deliver a company tax return’. If HMRC has sent you this notice and you don’t file your return on time, your company will be charged a penalty. You will be charged a flat-rate penalty of £100. HMRC will charge a further £100 penalty, if you file your return more than three months late.
If your company tax return is late for three or more accounting periods in a row, the initial flat-rate penalty increases to £500 with a further £500 charged if you file your return more than 3 months late.
Additional penalties for very late company tax returns:
- 18 months from the end of your corporation tax accounting period.
- Your filing deadline.
HMRC may charge your company, further penalties from that date. These penalties will be on top of the flat-rate penalty or penalties you’ve already been charged. These additional penalties are known as tax-related penalties because they are related to the amount of corporation tax your company owes. They are calculated as follows:
- Where a tax return is filed between 18-24 months after the end of your company’s accounting period = 10% of any unpaid corporation tax.
- Where a return is still not filed 24 months after the end of your accounting period = a further 10% of any unpaid corporation tax.
The amount of unpaid corporation tax is the amount due that you didn’t pay by the date your company first became liable to a tax related penalty.
7. If I’m self-employed what Tax Returns do I need to submit?
If you are self-employed, you have to fill in a Self-Assessment Tax Return every year. HM Revenue and Customs will send you the paper forms you need, or you can complete your tax return online.
You will be asked for details about profits from your business and any other income that you have to pay tax on, such as rental income. This is used to work out how much tax and National Insurance Contributions you have to pay. You must provide the correct information and return this to HMRC on time. You must keep all of your records so that you can fill in your tax return fully and accurately. The more detailed records you keep the easier it will be to answer any questions HMRC might have.
8. What forms are included in a Self-Assessment Tax Return?
Self- Assessment Tax Returns are designed to be relatively straight forward, although most people opt to use an accountant. The forms you need to fill in if you are self-employed are as follows:
- HMRC will send you a tax return- or a letter telling you to file online, every year in April. This relates to the previous tax year; from the 6th April to the following 5th April. If you receive a tax return,
- HMRC will always send you form SA100 and SA101. You may also have to file in some supplementary pages, depending on your circumstances.
- If self employed either pages SA103S, if your annual turnover was below £68,000 or SA103F is your turnover was over £77,000.
- If self employed in a business partnership you will also need to complete either SA104S (for partnerships that have only trading income) or SA104F (for all other types of partnership income). These forms detail your share of the partnerships profit and loss.
9. What are the deadlines for sending my Self-Assessment Tax Return?
If you are submitting a paper return, it must reach HMRC by midnight on the 31st October. If you decide to send your tax return online, it isn’t sure until midnight on the 31st January.
You will be charged a penalty if your Tax return isn’t received on time. When you send HMRC a Self-Assessment tax return, you will receive a Self-Assessment statement showing what tax you owe and how to pay. If you have paid too much it will show how much you will be repaid. If you file your Tax Return online, you can view this before you even receive it in the post.
Now for a few more random questions on sole trader and freelancer self assessments
What do I have to pay tax on?
Your tax bill will be calculated based upon your business profit. Simply put, that means everything you earned minus everything you spent. More specifically – everything that was a ‘business expense’.
What records do I have to keep?
By law, everyone must keep records of their income, and of any ‘capital gains’, for at least 22 months after the end of the tax year - and if you are self-employed as a sole trader, you’ll need to keep these records for at least five years and ten months after the end of the tax year.
We’d always recommend that you manage your finances in an organised fashion from Day One - in fact, as a self employed person it’s a legal requirement. That doesn’t necessarily mean investing in expensive accounting software, unless you feel you really need it - but instead, at a most basic level, keeping a record of every payment you receive from a customer and every business expense you have. If you enter everything into a simple spreadsheet in Microsoft Excel, you’ll always know where you stand.
You’ll need to keep copies of every invoice or sales receipt and every expense receipt. Keep these somewhere safe, filed either by month or by customer – whichever works best for you – and make sure that you can find any individual piece of paper whenever you need it. At Easy Accountancy we provide all of our customers with a free Bookkeeping Spreadsheet which can really help.
What personal information to I have to include in my Tax Return?
Although you are now operating as a business, and your income is based on the profits of that business, you are in effect completing a ‘personal’ tax return. So you’ll also need to make sure that you keep details of all other aspects of your income, if relevant. For example, if you set up the business halfway through a tax year, you’ll need details of your salary and your tax payments to date on PAYE. This should all be contained in the P11D and P45 which you should have received from your employer when you left.
Other personal income could include interest on savings, income from property rental or a part-time job, or any other income sources you might have – maybe, for example, if you were working on a more casual basis in the evenings before you set up the business?
Is it better to do my Tax Return as soon as the tax year finishes, or wait?
You will save yourself a huge amount of headaches and sleepless nights worrying if you do it sooner rather than later. There’s nothing to be gained by leaving it until the last minute – and it certainly won’t delay the date on which you have to actually pay the tax.
Leaving your tax return until the last minute not only causes more headaches and stress as the deadline approaches, but it also leaves you in a situation where there will also be no time to correct mistakes, or to ask for help if you have any problems. Which is why we would always encourage you to complete your Tax Return as soon after April 5th as possible. If you miss the final deadline then you could face a £100 fine, and if you don’t pay your tax bill by the correct date, you could start paying further penalties and even interest charges.
Will I be sent a form automatically or do I have to request one?
Self Assessment Tax Return forms are issued after the end of the tax year – which is 5th April – and cover the previous 12 months. You will receive one as standard if you have registered as self employed, which you should have done when you set up the business. If you do not receive one for any reason, then don’t think you’ve ‘got away with’ and don’t have to complete one. HMRC will catch up with you eventually, so you might just as well ask them to send you one. It’s your responsibility to do so.
What happens if I make a mistake or send incorrect information?
If any of your personal details have changed, or if you find that you (or the Tax Office!) has made a mistake, then you must let HMRC know as soon as possible. You can be penalised if your Tax Return is incorrect through fraud or negligence – for example of you provide incorrect figures on purpose - then you could end up with a criminal conviction if you try to ‘cheat’ the tax system. All in all it’s best to get it right first time if you possibly can!
Is there a way to make filling in my Tax Return easier?
Even with all of the guides and online help, filling a Self Assessment Tax Return can be incredibly daunting, as sometimes even the questions don’t make sense if you’re not a tax expert. This is why most self employed people usually look to an accountant for help. And of course, at Easy Accountancy we’re no exception. We can complete your tax return for you, or for only £60 a month we can provide valuable ongoing year-long support, plus of course completing and submitting your Self Assessment Tax Return when the time comes. This ongoing service is also invaluable for giving you information and advice on a monthly basis – all of which makes the process of completing your Tax Return at the end of the year that much easier.
Is it better to send it by post or do it online?
In 2009 over 5.8 million people filed their Tax Returns online, and this was a record total with a 50% increase on 2008. There are many benefits to doing it like this, and accountants will also usually do it this way also if you provide the information on time. In summary, these benefits include:
- No hassle with paperwork.
- No danger of it getting ‘lost in the post’.
- You get an extra three months to complete the Tax Return.
- You receive an immediate acknowledgement, so you know it’s arrived safely.
- You can save the form as you go along, so you don’t have to complete it all in one sitting.
- HMRC software can automatically calculate your tax for you.
- If you are owed any money by HMRC, you’re more likely to get it sooner because your form should be processed more quickly!
If you are sending your Tax Return by post, make sure you double-check that you’ve signed and dated everything, and that you have included all of the additional pages you need to. This is essential, whether you have completed the forms or whether an accountant has done so on your behalf. It’s still ultimately your responsibility to make sure you have sent in everything that you need to send.
And finally, remember to take a photocopy of the whole thing in case it gets lost in the post. You accountant should do this as standard, but if you’ve completed it yourself then this is vital. HMRC won’t acknowledge that they have received your forms, but they will let you know when everything has been processed.
How do I submit my tax return online?
To file your return in this way, you’ll need to register online and request an ‘activation PIN’ from the HMRC website. To do this, you’ll need your Unique Taxpayer Reference (UTR), which you’ll find on form SA100 of your tax return, as well as your National Insurance Number or postcode. It can take up to a week to receive your account password and become fully registered, so don’t wait until the last minute! Once you have completed your form, just make sure you print a copy off or save one on your computer, so you can still refer back to it if necessary.
How do I make sure I put enough aside for tax?
As a general rule of thumb, anyone setting up as a self employed person for the first time should expect to reserve around 30% of their total income to set aside for tax and national insurance payments. If you do this you should always have enough money available to pay those bills. Failing to reserve funds for tax bills could leave you in a situation where you do not have enough money to pay HMRC and this could result in the end of your business!
Is there any way to avoid the penalties if I send my Tax Return in late?
You have to have what is considered to be a ‘reasonable excuse’ for missing the deadline. There are no fixed rules on this, but usually any delay must be due to an exceptional or major unexpected event that's completely outside your control. Some examples of what HMRC may consider as a ‘reasonable excuse’ include:
- Documents being lost through theft, fire or flood leaving you unable to replace them in time.
- Life-threatening illness, for example a heart attack or an extended hospital stay which prevents you dealing with your tax affairs on time.
- The death of a partner shortly before the filing date – where possible, you may need to demonstrate that you had taken steps to prepare the return on time before this happened.
- Long term industrial action by Royal Mail.
- Problems with the online filing service, where no alternative option was available – for this, you'll need to provide copies of any error messages you received, so take ‘screen grabs’ using Ctrl/Print Screen wherever possible.
If you have a ‘reasonable excuse’ then you can ask for the penalty to be reconsidered, and HMRC will look at the information you provide, and any other evidence that’s available, in detail. But don’t wait until you receive the penalty notice, instead make any claim as soon as you possibly can.
How do I make a claim to have penalties removed?
To make a claim, write to your local Tax Office and give the following details:
- Your name and Unique Taxpayer Reference - you'll find this on documents such as your tax return or Self Assessment Statement.
- The date you sent your return.
- The reason why the return was late.
Of course, you can also ask your accountant to assist with this, should such a situation arise which is outside of their control.
Hopefully the above information has helped give some clarity on some of the most common questions asked. For more information or a general chat about your business plans please call us on 0500 234111 / 01442 275767 or email: firstname.lastname@example.org.
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