Make your Self Assessment tax return hassle-free this year with these 7 handy tips
As we near the deadline for Self Assessment tax returns, let’s face it, nobody is looking forward to the aggravation! Getting everything together, filling out forms, paying money to the Government… we didn’t get into business for this!
But Self Assessments don’t need to tax your brain as well: take a look at these useful tips and save yourself some headaches – and some money!
1. Remember the deadline!
Tax Returns for income earned between April 2018 and April 2019 must be submitted to
HMRC by 31st January 2020. But don’t leave it until the last minute! HMRC’s online system
unsurprisingly gets heavy traffic during the last week in January and if you’re caught in the
rush, you risk seeing an error message and missing the deadline.
If you do, you may receive a penalty notice, and whilst you may be able to appeal on the grounds of a
system issue, this is not a certainty. In any case, you’re trying to save hassle, not cause more, right?
2. Save money for your tax liability
HRMC also requires any Income Tax due to be paid by the same deadline, 31st January. So make sure you save the money for this as you go along. A good way to save is to put aside at least 20% as soon as you receive the income from your clients or customers, and you may even find it useful to open a separate bank account for tax payment savings to keep it clearly distinct from other monies going through your accounts.
HMRC is very stringent if you miss the deadline for paying your tax bill and they normally charge interest on any outstanding amount on per day basis. Saving well in advance should help with your cashflow and ensure you have the funds available when you need them.
Don’t forget you may also need to pay a ‘payment on account’ to HMRC for the next tax year, which is normally 50% of your current year tax liability.
3. Keep good records as you go along
Whether you use a simple spreadsheet or one of the many affordable cloud accounting systems on the market, if you keep your bookkeeping up to date throughout the year you will thank yourself come self-assessment time.
Decide early how you will record all your financial transactions and keep to the routine. Our pro recommendation would be to use cloud-based bookkeeping software because it will:
- Keep all of your records (such as invoices and receipts) digitally, ensuring you are already compliant with the Government’s Making Tax Digital (MTD) requirements.
- Keep you on track throughout the year, meaning you are only ever a few clicks away from finding out how your business is doing and, if you are profitable, your estimated tax liability to be certain you have the funds available.
- Integrate with your bank feeds making the bookkeeping process far less laborious and your visibility so much greater.
Bookkeeping software charges are also allowable expenses for tax purposes so it reduces your taxable profit.
4. Get good advice on tax savings
Have you looked into your options for saving tax? Again, don’t leave this to the last minute, get competent advice from a decent accountant and you may end up saving a fortune.
5. Make sure you’re registered
Is this the first year you’ve had a Self-Assessment tax return to submit? Have you registered yourself with HMRC to get your Self-Assessment UTR number? The deadline to register for a UTR number if you started your business in the 2018-19 tax year was 5th October 2019. If you missed the deadline, HMRC may send you a penalty for late registration of UTR. But don’t let that stop you registering ASAP to avoid further penalties.
6. Cash-basis or Invoice-basis? Make sure you choose
It’s very important to decide whether you will prepare your accounts following a cash basis policy or on an invoice basis. A handy hint: if you prepare your tax return on a cash basis then your income and expenses will only include actual income received and expenses paid out.
7. Don’t panic, let someone help you
A hassle it may be, but there’s no need to be left in the dark or stuck doing it all yourself. Get an accountant or bookkeeper to organise everything for you and free yourself from the stress.