“Self Assessment” is how HM Revenue and Customs (HMRC) refers to its system for collecting Income Tax. If you’re self-employed as a ‘sole trader’, a partner in a business partnership, or a company director, you’ll almost certainly be required to submit Self Assessment Tax Returns (SATRs). Here are 10 top tips to help you get Self Assessment right.
1/ Know your tax deadlines.
The deadline for filing your Self Assessment Tax Return is normally 31 January. Plan and organise well in advance to avoid late filing penalties.
2/ Save for your tax bill.
Instead of dreading your annual tax bill, put money aside for it. HMRC’s self-employed ready reckoner can help you estimate how much you need to be saving.
3/ Get an online account.
Filing online gives you more time to fill out and submit your tax return. You’ll need to register for HMRC online services to get a login.
4/ Gather your paperwork.
Completing your tax return will be much easier if you have your bank statements, bills, forms, and any other income-related papers at hand before you begin. If you haven’t got all the paperwork it’s better to file on time and estimate the figures rather than filing your tax return late.
5/ Report everything.
Declare all income from employment, self-employment, property and interest, and gains on your savings and investments during the tax year.
6/ Be clear on Allowable Expenses.
Certain business running costs are classed as Allowable Expenses and can be deducted from your gross profit to calculate the taxable profit.
7/ Be clear on Tax Allowances and Tax Relief.
Tax Allowances determine the amount of income you can earn before paying tax. You can claim Tax Relief on pension contributions and other eligible payments you make.
8/ Prepare now for MTD.
Self-employed businesses and landlords with annual business or property income above £10,000 will need MTD compatible software to comply with the MTD for Income Tax rules coming into effect from 6 April 2024.
9/ Avoid phoning HMRC.
You could wait a long time for your call to be answered. If it’s not an emergency you’re better off seeking online help. You’ll find answers to most of your questions on HMRC’s website.
10/ Hire an accountant.
Tax rules change regularly; it takes time to understand them and skill to apply them correctly and efficiently. Mistakes can be costly and the effort you spend on getting your SATR right could be used more profitably. Hiring a professional is an investment that will save you time and money in the long run.
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