Self Assessment
Confused about Self Assessment forms? We get the answers to the most common queries about the dreaded tax return.
When do I need to fill in a Self Assessment form?
If you're self employed, run a company, or you have more complex finances, HM Revenue & Customs (HMRC) will need to know how much you have earned in order to find out how much tax you should pay. For example, if you're self employed you'll need to provide details about your business accounts on the form.
Self Assessment
To get your head around the complexities of self assessment, Scott Wilson from the East Kilbride tax office offers some helpful advice.
If your only income is earnings from your job, you usually won't need to fill a form out because the right amount of tax should be taken automatically from your wages under PAYE.
It's your job to tell HMRC if you need to pay tax on something that isn't already being taxed, for instance if you start self-employment, or acquire a new source of income, such as renting a property. After you've told HMRC about it they should send you a tax return. Be careful though - there's an October 5th deadline, following the end of the tax year, to tell HMRC about it.
Where do I get a Self Assessment form and what's the deadline?
You can either complete the Self Assessment form online or on paper. Either is acceptable, but the date you need to complete it by is different. If you complete your form on paper, you need to do it by October 31 following the tax year you are completing details for. If you complete your form online, you need to do it by January 31 after the tax year.
To complete the form online, go to HMRC's website, click on Self Assessment and register. You'll then be sent a secure password in the post. This can take around seven days to come through, so don't leave it too late. Once you get this you can fill the form out online and send it straight back.
Alternatively you can contact the HMRC who will send you a paper version.
The Self Assessment form looks massive - how do I fill it in?
When you receive the tax return form you'll also be sent lots of notes and help sheets. If you get stuck you can call a special helpline that's been set up and is open until 8pm, seven days a week. The number is 0845 900 0444. Anyone can fill the form out for you as long as you sign and date it and make sure that all the details on the form are correct. If you're still struggling with it you can use the service of an accountant, but they will normally charge you for this.
What will happen if I don't fill the form out?
If you are late completing the form, you will be charged a penalty, which could be up to £100. If you delay further, more penalties can be charged.
What are the most common mistakes made?
The most common mistake made when filling out a Self Assessment form is to forget to sign and date the form or to leave some details out, so always check you've sent everything that you need to. The other common mistake is to give the right details, but put them in the wrong box. Re-read the notes and make sure that everything is 100% correct because it will save you time in the long-run.
What happens when I fill in my form? Will I have to pay more tax?
Once HMRC receives your form you'll be sent a calculation that will tell you how much you have to pay. You only have to pay tax on amounts over your tax-free allowance, so if you've already had the correct tax deducted by your employer then you won't have to pay it again. If you fill in your form online you'll see a calculation of your tax come up straight away so you'll know exactly what your position is. You might also have to make a 'payment on account', which counts towards next year's tax bill.
What do I need to prove my income?
If you're employed you should receive a P60 at the end of the tax year - this will tell you your earnings and tax deductions for the year. If you've left any jobs during the year then you will have received a P45, so make sure you keep hold of them. If you're self employed you should keep a full and accurate business record and you should also show any money you have coming in and out of any business accounts. If you keep a record book showing receipts, invoices, purchases, sales of stock, business expenses, and so on, then you'll also need to keep those to hand.
You do not usually have to submit proof of your income with the tax return itself, but HMRC can sometimes ask you questions about the return later, so be prepared to back up your figures if asked.
What are tax allowable and non-tax allowable items?
You may deduct the running costs you incur solely for the purpose of your business. These include the cost of:
- Goods bought for resale;
- Employee wages;
- Rent and overheads of the premises you use for the business;
- Stationery;
- Running vehicles used for the business.
The first £4,250 you earn from letting a room in your own house is tax free (£2,125 if letting jointly).
I'm a student with a small money-making hobby. Am I self employed?
If you have a hobby that brings in some money you may be considered to be self employed and will need to put details on your tax return. This includes if you are selling things on online auction sites beyond getting rid of some stuff you don't want. The best thing to do is to contact your local tax office to get further advice.
How long do I need to keep my tax records for?
You will need to retain your records for five years from the latest date by which your tax return has to be sent in.
Where can I get help?
HMRC can help answer questions about completing your tax form, but if you feel you really don't have the time or the confidence to handle your own tax affairs you'll need to get professional help.
You can get much more information on the LITRG website. If you still have doubts and you are on a low income you can try the charity TaxAid for further help.
If you can afford to pay someone to help you will need a tax adviser or accountant. Start by asking your family or friends to recommend a good one. Make sure whoever you go with is registered with one of the professional bodies: the CIOT, ATT, ICAS, ICAEW or ACCA.
Charges vary enormously so make sure the costs are not going to outweigh the savings. Always get a firm quote before they start to act for you. For a simple tax return service you can expect fees of at least £100.
With thanks to Scott Wilson from the East Kilbride Tax Contact Centre for help with this article.
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