If you’ve never had to complete a self-assessment tax return, the process can seem daunting. But don’t worry—this guide is here to simplify everything! Even if you’ve filed one before, you might still learn a few new tips for managing your self-assessment more efficiently.
What is self-assessment?
self-assessment requires you to calculate your own tax liabilities by reporting your income and financial activities to HMRC using a form called SA100. Based on the information you provide, HMRC determines how much tax and National Insurance contributions (NICs) you owe.
This system contrasts with the Pay-As-You-Earn (PAYE) method used for employees, where income tax and NICs are automatically deducted from wages. If you’re self-employed, or if you have other income sources such as dividends, pensions, rental income, or savings and investments, self-assessment is necessary because tax isn’t deducted automatically.
Who has to register for self-assessment?
Self-assessment is required for anyone who receives untaxed income. Sole traders, for example, need to report the income they earn from invoices, as tax and NICs aren’t deducted upfront. You may still need to file a return even if you don’t owe any tax.
Other scenarios requiring self-assessment include receiving income from abroad, rental property income, investment income, or dividends from a limited company.
Additionally, employees earning over £100,000 must file a self-assessment tax return, even if their tax is deducted at source. This is because once you exceed this income threshold, your personal allowance changes, and HMRC needs to ensure the correct tax amount is paid.
When to register?
Before filing a tax return, you need to register for self-assessment with HMRC by 5 October following the end of the tax year you’re reporting for.
Missing this deadline could result in penalties. However, the good news is that you only need to register once unless you inform HMRC that you no longer need to file a return.
What you need to register
Registering for self-assessment is a straightforward process. You’ll need to provide some personal details, including:
- Your full name
- Date of birth
- National Insurance number
- Phone number
- Email address
Once registered, HMRC will send you a unique taxpayer reference (UTR) number through the post. This UTR is what HMRC will use to identify you moving forward.
Filing your return
After registering, it’s time to file your tax return. The process can seem complex, especially for first-timers, but keeping an eye on common pitfalls will make things much smoother. Watch out for these common mistakes:
- Missing or incorrect UTR/National Insurance number: Double-check these before submitting your return to avoid delays.
- Incorrect figures and incomplete information: Mistakes in your reported income or expenses can cause your return to be flagged for investigation.
- Ticking the wrong boxes: Self-assessment involves selecting the correct sections and income categories. Review your form before submitting.
- Over- or under-claiming allowable expenses: Ensure you’re claiming only legitimate business expenses to avoid problems with HMRC.
- Missing some sources of income: Be thorough when declaring all income streams, as failing to do so could lead to penalties.
- Leaving your tax return until the last minute: Procrastinating can lead to errors and stress. It’s best to start early and give yourself plenty of time to prepare and submit your return.
For more information on common self-assessment mistakes and tips for avoiding them, check out our blog!Â
Speak to an Expert
Self-assessment can be overwhelming, particularly for those unfamiliar with the process or those juggling multiple sources of income. That’s where hiring an accountant can save you time, money, and a lot of stress. The cost of getting it wrong could far outweigh the expense of professional help.
An accountant will ensure you stay compliant with HMRC, submit your tax return on time, and optimize your tax liabilities to avoid paying more than you need to. They can also help if you have complex revenue streams, such as investment income, property income, or earnings from abroad.
By understanding the self-assessment process and taking advantage of expert advice, you can navigate your tax return smoothly and avoid costly mistakes. Reach out today to speak with an accountant who can help you every step of the way! Don’t forget to follow us on LinkedIn for daily tax updates and business advice!
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