Self-assessment is how you should declare income you’ve received to the government and calculate the tax due.
How do I know if I should be submitting a tax return?
- Are you a self-employed sole trader earning more than £1,000 per year?
- Are you a partner in a business partnership?
- Are you a director of a limited company?
- Is your total income (minus tax relief) more than £100,000?
- Do you pay the High-Income Child Benefit Charge?
- Did you earn more than £2,500 or more from property or land in the UK in the last year?
- Have you earned more than £10,000 from savings interest or share dividends?
- Have you received a payment or charge on a private pension, above the annual or lifetime allowance?
- Do you pay tax on income from a trust?
- Do you receive taxable foreign income of £300 or more?
- Have you received £2,500 or more in interest, tips, commission or cash-in-hand payments?
Did you answer yes to any of the above? Then the answer is simple – you need to submit a self-assessment tax return.
The deadline for submission for the 2018-19 tax year, which ended on the 5th April 2019 is the 31st January 2020. This must now be done online as the deadline for submitting by post has now passed.
Is there a penalty for late submissions?
Yes, and it is calculated on a sliding scale, depending on how late your submission is. If you are up to 3 months late then you automatically get a fine from HMRC of £100. Go over 3 months and a further £10 per day is charged up to a maximum of 90 days (that could mean an additional £900 making a total of £1,200).
When do I have to make payment to HMRC?
Regardless of whether you submit your self-assessment return via post or online, you will need to pay any tax you owe for 2018-19 (and potentially any National Insurance) by 31st January 2020. If you are late, HMRC will impose penalties. These will be a charge of 5% of the amount due which will be applied periodically and interest on the amount due will also be charged.
How can I reduce my bill?
You can claim a tax deduction on some of the costs of running your business. These are called allowable expenses. They appear as costs in your business accounts and will be deducted from the profit that you pay tax on. These include:
- Business premises
- Stationery and phone bills
- Professional and financial services
- Staff and employee costs
- Travel costs
- Stock and Materials
- Marketing and advertising.
There is also something called simplified expenses, which are flat rates and can make working out expenses significantly easier.
What is a payment on account?
These are advance payments towards your tax bill (including Class 4 National Insurance if you’re self-employed).
You must make 2 payments on account every year unless:
- your last Self Assessment tax bill was less than £1,000
- you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings
Each payment is half your previous year’s tax bill. Payments are due by midnight on 31 January and 31 July.
Did you know that if you use an accountant to prepare your self-assessment return then their professional fees are considered an expense and can be offset against your tax bill, and for many, this means they effectively pay nothing to receive this service?
So is self-assessment looking like an administrative headache for you?
If so then why not get in touch with the team at Accountwise and we will be happy to discuss and give you guidance on your specific circumstances. We have also written a blog on how to calculate your payments on account – this can be found on our website at https://www.accountwise.co.uk/.