SELF ASSESMENT?? that is January, I hear you say –
well self-assessments can be filed from as early as the 6th of April! you have 9 months from this date to file.
Unfortunately, most people (inducing accountants) leave it until the last minute, hence why January has
been (incorrectly) dubbed as self assessment season.
So stick with me here- What a crazy world it would be where you filed your return in April – this would give you 9 months- YES 9 MONTHS! to save for and pay that dreaded tax bill -18 MONTHS to pay that awful second payment on account- 9 months of future planning – 9 months of less stress and worry – 9 months of restfull sleep and 9 months of that smug feeling knowing that you are ahead of the curve.
So, if you want to be ‘that’ person and the above doesn’t appeal then carry on with your norm and stop reading now. If, however you would like to be like the rest of the CA clients and reduce your stress levels over the next 9 months then read on.
So, as I said previously, you can file from the 6th of April, this would only normally apply if you are super organised and 100% on top of your bookkeeping if this is not you then don’t fret, you can still get it in nice and early. Just start now!
The first thing you need to do is to ensure you have your UTR not sure what this is or how to attain one then read my blog – Current Accountancy Ltd | UTR More commonly known as ‘The What Now??’
Once you have the magical UTR it is time to start the process.
Fill in all your personal details, pop in your magical UTR and complete the form with any employment income received.
This can be found on the P60 you should receive from your employer following the tax year.
PAYE years also run from the 6th of April- 5th April so the total amount is what you will need to input. You will also need to fill in what tax and NI contribution you have made during the period, again this can be found on the P60. If you don’t have a P60 then don’t panic. If you left your Job before the end of the tax year, then this information can be found on your P45 which you will have received when you left. Alternatively, the info will be on your final payslip- it is the year-to-date figures you need. If you had more than 1 job, then you will need to enter the relevant information for each.
Now one thing that people don’t generally know about (and HMRC don’t shout about) is that you can also claim for expenses incurred from work but not reimbursed by your employer – Such as the working from home allowance – a flat rate of £6 per week for employees who need to work from home, the petrol allowance of 45p (for up to 10000 miles) for any traveling done for work which is not your normal workplace, the washing allowance for clothes you need to launder yourself etc etc. This is also the part where you enter any tax reliefs. Once all of this is entered you will need to think about the supplementary pages- these are for things such as self- employment, capital gains, partnerships etc etc.
For this blog we will just be looking at the self- employment – SA1035 or SA103f and we will look at the 21-22 tax year (Just for reference).
So, let’s start at the beginning.
Income includes All of your income from the 6th of April – 5th April some of the things you need to include are
If you are doing your own return, then we would recommend that you work on the cash basis (you will need to tick this option on the form). This is the simplest way to work out your income and expenses. It works based on when you received cash into the business or paid it out. So basically, anything that hit your account prior to the 5th of April 21 will not be included and anything After 6th April 22nd will again not be included. If made a sale on the 3rd of April 21 but the money, come into your account on the 10th of April 21 then it would go into this return.
The accruals way can be a lot more tax efficient however it is a lot more complex so better to get your accountant to do this for you.
Moving on to expenses- you can put anything used for your business through as an expense. These include
Basically, anything that you are using in or for your business can be put through – the only caveat is it must be used for the sole use and purpose of the business. The exemption to this is things that you own personally but use for the business, such as a personal mobile phone. These can be Split based on a % of use so if you use your phone personally 50% of the time and business 50% of the time and your yearly bill is £300 then £150 of this can go through as an expense, the other £150 will be a disallowable expense.
The same goes for home office expenses. You need to workout your home (being 100 %) and how much of this space you use for work. The other option (easier option, but not as tax efficient) is to use the flat rate scheme, information on current flat rates that can be claimed at present are here. Using this option means you don’t claim any other home office expenses, it will workout less but is a much easier method.
Personal vehicle expenses are another one that can be apportioned, however this is a lot more complex and is all based on mileage used for work and personal use. We always advise our clients to use the flat rate method for business travel using a personal car this is currently 45p per mile for the first 10000 miles then 25p per mile after this. All you need to do is keep a track of the miles you use for business and x this by 45p for the first 10000 then 25p for the rest.
The list of expenses is quite long, you can find all the expenses you can claim here.
What we tell our clients is that if you can comfortably stand in front of a HMRC representative and confidently explain why the expense is used for business then put it through.
There is also the option of using the trading allowance, this lets you write off £1000 of income (so if you took £10000 for the year, only put down £9000) but this means you don’t put through any expenses. This generally works best for service-based businesses which don’t have a lot of expenses, if your expenses are more than £1000 then you are best putting these down and claiming for them separately however if your expenses are less that £1000 for the year then the trading allowance is the way to go for you. There is just a tick box on the form that you will need to tick and all you have to put on the SA form for self-employment is your income less £1000, simples!
Once you have decided which of the above options will be best for your business and filled in the relevant information it is time to check through everything, make she you have included all your income, remember to make sure you keep the proof (invoices /receipts etc) for 6 years after the year end date, we advise 7 years as best practice.
When you are happy hit the Submit button. This will then go through to HMRC and they will then send you a letter to let you know what you owe. Print off or save your return so that you have the proof of what you submitted and your submission receipt which will be generated once the return has been processed.
As a guide, if you have Made over £12570 (income less expenses) then you will pay 20% tax on everything from this amount up to £57060 then the tax goes up to 40%. Class 2 NI is currently £3.60 per week and class 4 NI is currently 4%. This will be less any tax you have already paid through employment.
If you owe more than £1000 or less than 80% of the tax owed has been paid through a different source (e.g. paid at source through your tax code) then HMRC will split the amount to be paid, half in January and Half in July, on top of this though they will also ‘guestimate’ what they think your tax liability will be for the following year (22-23 in this instance) and add half of this amount onto the bill as well.
Hope that helps a little bit. if you need anything further though then give us a shout.
Good luck and happy filing.