Being self-employed has many benefits and perks and running your own business can often be the route to happiness. But one thing that often brings annoyance to business owners is the annual self-assessment tax return. Filling out your tax return is one of the most important tasks that you need to do as a business owner, and it is something that can be a largely intimidating and sometimes overwhelming process, particularly if you’ve not done it before.
Tax returns are the Government’s way of making sure that every business pays enough tax. If you’re a freelancer, a business owner or are self-employed then you will need to fill out a self-assessment tax return, which details any earnings, deductions and expenses. It sounds complicated, however, with some preparations, you can make sure that you’re ready for any tax-related surprises.
Why Do I Need To File A Self-Assessment Tax Return?
Tax brackets aren’t a one-size-fits-all thing, they are more judged on a sliding scale – how much you earn will depict how much you’ll pay in terms of tax. No matter if you’re a high-earning business, or just earning some additional income on the side, then understanding and learning more about tax brackets can help you to understand what you’ll have left once tax has been paid.
Self-assessment is the process of telling HMRC how much money you have earned that year, as well as details of other aspects of your financial situation so that they can work out just how much tax and national insurance you need to pay. You will usually do this online and, although the name suggests self-submission, you don’t have to do it by yourself, as an accountant can do it on your behalf.
Complete Your Tax Return As Soon As Possible
If this is your first time completing a self-assessment tax return, then it’s a good idea to get started on filling it out as soon as possible, particularly if you don’t have an accountant helping you to do so. This way, you can spot if you have any information missing which is needed, and then you can look to gather this in advance of the deadline date.
By starting it as early as possible, you’re then able to decide whether you need to get self-assessment help from a professional or accountant. By completing your self-assessment tax return in good time, then you’ll also be able to see how much tax you owe early enough to budget for the payment if this is required.
Don’t Be Afraid To Ask For Help
Filling out a self-assessment tax return can be a challenge if you’re not used to the tasks that are required to fill it out. If you identify early on that you may struggle to fill out the assessment or if this is something that you’d rather an accountant fill out the information, then this gives you plenty of time to get things in order.
If you are considering getting help, then it’s best to get this sorted early so that any mistakes can be rectified early on, which then helps you to reduce the risk of facing an audit by HMRC and avoid paying any potential penalties. If you leave it late, then you might struggle to find an accountant who can help you with your self-assessment tax return and you then face the possibility of submitting your assessment late, which may then result in a late penalty fee.
You must register for self-assessment well in advance, as it can take up to 20 working days for HMRC to process your application. Once registered, you will receive a Unique Taxpayer Reference (UTR), which you will need when filing your tax return. If you are completing your tax return online, then you’ll also need to register for the HRMC online services first, as you will need to receive an activation code, which can take up to a week to arrive.
Know What Expenses You Can Claim
There are a wide range of different expenses which you can legitimately claim back in order to reduce the amount of tax you need to pay. It’s important that you understand and learn more about what types of expenses you can claim back so that you can make more informed decisions in the future.
The Government understands that running your own business can be expensive, which is why they allow you to deduct the cost of some business expenses from your overall profit, which therefore allows you to reduce the amount of tax that you owe through the self-assessment form. Some expenses which you can claim tax back on include office supplies, charity donations such as Gift Aid, costs of mileage or travel and legal and financial costs. Expenses you pay, such as export credit insurance which may be relevant to your business, unfortunately cannot be claimed back, but if you leverage this with things that you can claim back, then the costs can be balanced out.