How do I prepare my own Self-Assessment Tax Return?
How do I prepare my own Self Assessment Tax Return for 2021?
If you're self-employed in some form, you know the drill. The time is looming to get your tax return done, so you can pay what’s owed and file on time. It's tedious work with a lot of calculations - all while trying to keep up with the day-to-day running of your business. It’s easy to put it off, but all the time you do, you risk cutting it too close, leaving too little time to be tax-efficient with it, and running the risk of incurring late filing penalties.
Self Assessment covers your income from all sources, including self-employment, property, capital gains, savings and investments – including income from abroad – plus employment earnings if applicable. The more complex your income streams, the greater the opportunity to optimise your tax position and minimise what you have to pay. It’s time-consuming, but well worth doing properly.
Do yourself a favour and take advantage of our FREE self assessment starter service - plus get 20% off next years return when you file with Mushroombiz!
Planning on filing your own self assessment? Below are some handy tips from the Mushroombiz Team to help you get the best from your 2021 tax return.
- Register for a Unique Tax Reference (UTR) Number. You need to register before the deadline. To submit your self-assessment for the financial year to 5th April 2021 (which is due 31st Jan 2022), you need to have registered for a UTR number before 5th October 2021. If you’ve missed this deadline, don’t panic, just give us a call because we can usually help.
- Setup a login with HMRC’s online Government Gateway. Once you’ve applied, HMRC will send you an activation code to the postal address they have on file. It might sound obvious, but do make sure your address is up to date! Also, the activation code is only active for 28 days, so make sure you use it in time.
- Consider your income streams carefully – for example:
- Employment income – if you’ve had say 3 or 4 different employers during the year, do you have all the required P60s or P45s for these employers, which will give you your year-to-date tax, salary income and student loan deductions? If you’re missing a P45 or P60, your best bet is usually to go back and ask your employer to provide one.
- Dividend income – Do you have a breakdown of the total value of dividends you’ve drawn during the year? Make sure you have the dividend vouchers for each in case HMRC check and ask for them. The total dividend figure for each company you’ve worked for should be included in your self assessment.
- Self-employed (sole trader) income – make sure you have a breakdown of all your self-employment expenses and income. It’s really important for expenses that you have sufficient evidence to back them up - if HMRC comes calling, they will want to see the evidence. If you’re missing an invoice for an expense, you can always request a new copy from your supplier. If you have more than one business as a sole trader, you will need to provide a separate income and expenses breakdown for each one. Certain expenses may be capital items (such as a laptop or a new van) which have to be treated a bit differently, as capital expenditure on your balance sheet, in which case capital allowances will be applicable.
Additional circumstances to consider when filing...
- If you’ve sold a business asset (such as a rental property or shares in a business), there are probably Capital Gains implications. You must make sure you complete the Capital Gains section of the Self-Assessment carefully. You’ll need to have a full record of the transaction, such as a property Completion Statement or proof of share sale, to satisfy HMRC.
- If you’ve used your own vehicle for business mileage, you can claim back the fuel costs as an expense, which will reduce your taxable profit (subject to certain rules).
- If you’re contributing towards a private pension pot, make sure you have a breakdown of your contributions for the full tax year. This is important, as it can reduce your tax liability.
- If like many you are still repaying that pesky student loan, make sure you complete the student loan section of the self-assessment. HMRC will use this to calculate what repayments need to be made for the year in question.
- If your profits are under the taxable income threshold for National Insurance Contributions (NIC), you won’t have to pay any Class 4 NIC, however you can still voluntarily pay Class 2 NIC, to stamp your eligibility for state pensions for the year. Class 2 NIC must be calculated manually.
- Don’t forget to save! If you‘ve made mistakes, you can go back and change what you’ve included right up to submitting the return, but the last thing you’ll want to do is lose what you’ve already filled-out just by forgetting to hit the save button.
- Check the draft calculations generated by the system once you’ve added all your information. It can be all too easy to add an extra 0 when you don’t mean to (£50,000 is a lot more than £5,000!) but it can have a big impact on your tax liability!
- Once happy, save the tax computations and tax return form, and submit to HMRC – Remember to save a copy of your tax computations and tax return form as a PDF so you can easily refer to it later without logging back in.
- Finally, Plan Ahead to pay HMRC! Your tax computations will tell you what you need to pay. The deadline to pay is 31st January (the same day as the Self-Assessment is due). If you have any second payment on account to make (again this will be shown on your tax computation), the deadline to pay is 31st July following submission of your Self-Assessment earlier in the year.
Details on how to pay HMRC can be found on the government website.
If in doubt, get help!
Our team of accounting professionals at Mushroombiz can help you get your tax return in order. Remember, the deadline is 31st January. Don't wait until it's too late or else you will be penalised for not completing your filings on time. We want to make sure that you are prepared come tax season, so don’t hesitate to contact our experts today.