Self Assessment is a phrase that often strikes dread into some people. Add the word deadline and that can turn to fear! But what is it and why do we hear so much about the deadline?
What is Self Assessment?
You are eligible to complete a Self Assessment tax return if you earn income other than within a PAYE (Pay As You Earn) scheme. What that means is that if you are fully employed and get a wage, you won’t need to fill in a form. But if you are paid in addition to that (for example through working as a company director or you get income from property rental) you need to fill in a tax return.
Self-employed people also need to fill this return in.
What is a tax return?
A Self Assessment tax return is the form you need to complete so you can report details of your income and expenses for the tax year ending 5th April. Once you send the form to HMRC they work out what tax you owe and you need to pay it by the deadline of 31st January the following year.
So, if you were receiving the income that is eligible for Self Assessment between 6th April 2018 and 5th April 2019, for example, you need to get your return submitted and the tax owed paid before the deadline of 31st January 2020. Failure to do so will result in fines!
If you think that you can escape paying tax by just burying your head in the sand, beware! As well as penalties, you could face court if you don’t tell HMRC about your income.
Should I register now?
If you have any form of income that is eligible for Self Assessment and you haven’t registered, do so now. Delays mean you miss filing or payment deadlines. It’s better to do it as soon as you can. Give yourself plenty of time because any mistakes could cost you dearly. If you are self-employed you should register as soon as you start your business.
How do I register for Self Assessment?
If you’ve never filed online to HMRC before, you need to register with them for an activation code. This takes a bit of time because HMRC posts out the code, so this reinforces the need to register without delay as any hold-ups may well cost you.
If you’re not sure how to get a code (known as a Unique Taxpayer Reference, or UTR) you need to visit this website https://www.gov.uk/log-in-file-self-assessment-tax-return
The website has handy headings to click for registering, which means you’ll be filling in the correct form.
Once you’ve registered, the UTR code will appear within 21 days. Once you have that you need to start thinking about your tax return by keeping records of your income and outgoings so that it is easier once you come to fill in the form.
What do I need before I fill in a return?
You need to make sure you have all the details necessary regarding your employment or self-employment. This may include finding your P60 (if you earned more than £8,500) or your P11D, which outlines information about expenses and benefits. You may need payslips, especially if you haven’t got a P60.
You also need interest statements, such as those from banks and building societies and details of any pension contributions. If you are self-employed you’ll also need your books, which show your income and expenses.
How to fill in a return
Once you log in, check your personal details and then fill in the sections that fit your circumstances.
The online form reacts to the answers you give and that should mean any sections that are not relevant to you are removed. The software also offers reminders about where to find the information you need, such as where details can be found on your P60.
Take your time when reading small print and the guidance from HMRC. Never rush your return! It’s one of the reasons why we would never recommend leaving it until the day before the deadline as it can be easy to make a mistake if you rush.
When should I fill it in?
The simple answer is now! If you have the information ready, don’t leave it until December or, even worse, January. Why? Well, the biggest issue if you do and you owe money is that you may not have time to raise the finance to pay it! If you can get your return done within a few months of the 6th April of whichever year, then you’ll have more time to save up to pay your bill!
What if I haven’t got time to fill in a return?
Getting everything in order can be difficult if you’re busy with your work. The HMRC Self Assessment online return takes time to complete and can be fraught with problems if you’re not 100% sure about what you’re filling in.
You can use software, such as Quickbooks, which will have the information you need to fill in your Self Assessment return.
Of course, you can also use an Accountant. The benefit is that the experience of the Accountant not only means your return is correctly filled in, but that it is compliant. They can deal with any queries from HMRC that may arise. They will also try to save you money on your tax bill by identifying expenses that you might not have even thought about or be aware of!
So what are you waiting for? Get ready now! If you’re still unsure, contact us for details.