How to complete a self assessment form
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Is it the first time that you are required to complete a self-assessment form? If you have recently become self-employed, or if you are taking on additional freelance work to subsidise your wages, chances are that it is.
The form is used by HM Revenue & Customs (HMRC) to calculate how much income tax you need to pay for the previous years profits.
More than 11 million people in the UK need to submit an annual self-assessment form to HMRC by January 31 each year.
Although it can seem daunting, completing your self-assessment form is easier if you are organised and have all the relevant documents available.
Do you need help with your self assessment tax forms?
The information below will help you understand if you need to complete a self-assessment tax return and what you need to do to get it right.
It is a legal obligation for a self-employed business working in the UK to complete this information and return it by the deadline. if you fail to provide the right information or if you do not get it back on time, you could face a penalty.
If you have previously needed to complete a tax return, but need it to be withdrawn, you need to contact HMRC on 0300 200 3310.
What details do I need to share for self-assessment?
After you have registered online with the HMRC, you will need to fill out the sections of the form that apply to you.
Before filling out your self-assessment tax return, make sure you have records of the following documents:
- Your National Insurance number
- Accounts, invoices, receipts or other records of income
- P60 and/or P45 forms
- Your UTR number
- Records of any relevant expenses
- Contributions to pensions or charities
The following information will need to be provided to calculate your self-assessment tax return.
This includes all un-taxed and taxed income. It includes income from self-employment, capital gains from selling assets, dividends from shares and taxable interest from savings
This is the total payments received from a state pension and any lump sum.
Any lump-sum payments or annuities from a private pension.
All benefits received including jobseekers allowance, bereavement allowance, carers allowance or incapacity benefits.
Any income received that is not related to interest or dividends. Allowable expenses related to this income should be included.
Any payments that had deductions made after-tax.
The total amount donated with Gift Aid.
Blind persons allowance
Confirmation that you claim for blind persons allowance.
Student loan repayments
Give details of any student loan deductions made by your employer.
High-income child benefit charge
If you receive child benefit while you or a partner is earning more than £50,000.
The amount of personal allowance that you transfer to a spouse while your income is below the personal allowance.
Who needs to submit a self-assessment tax return?
A self-assessment tax return is required for all self-employed people working in the UK. The form must be completed and returned to HMRC each year.
From this information, HMRC will calculate how much income tax and National Insurance is required to be paid from your profits earned in the year.
Other people required to submit a self-assessment tax return include:
- Employees or pensioners who earn over £100,000 in the last tax year
- If you earned over £2,500 from untaxed income such as commission or tips
- Persons who owe capital gains tax for profits on asset sales
- If you earned over £10,000 from investment income or savings interest
- Higher-rate or additional-rate taxpayers who need to claim tax relief on pension contributions
- People living or working outside of the UK who earn an income from the UK
- Trustees of someone who has deceased
- Trustees of a registered pension scheme
- Business partners or directors within a limited company
- People who haven't paid enough tax in the previous year and received a P800
- People who claim child benefit who's partner earns over £50,000
- People receiving a state pension that is above the personal allowance
- Lloyd's of London insurance market "name"
- Religious ministers
Are you doing some freelancing work alongside your regular income?
Many people supplement their income by doing freelancing on the side. This is work that you may not wish to disclose to your boss. But you will need to let the taxman know about the extra money that you earn.
You will need to register as self-employed with the HMRC and tell them how much you have earned in your freelancing work.
You will need to provide a full account of money earned up till the end of the previous tax year ending 6th April. Your self-assessment form will need to be returned for the deadline of 31st January.
How do I register with HMRC
If you need to submit a Self Assessment tax return, you first need to register with HMRC.
You can register by post, phone or online.
It is always advisable to give yourself plenty of time to complete the submission in case there are any problems that need to be resolved.
When you are ready to register, you will need to provide:
- Personal details
- Business details
- National Insurance number
Your registration will need to be submitted by 5th October of the year that you are submitting the return for.
If you miss the 5th October deadline to register, you may face a penalty.
After registering with the HMRC you will receive a Unique Taxpayer Reference (UTR) number by post. You will also receive a PIN number.
Your UTR and PIN will permit you to access the online services to file your Self Assessment returns.
Once you are registered with HMRC, you will receive reminders for when you are required to provide your next Self Assessment.
If you return to full-time employment, decide to end your self-employment or move abroad, you need to tell the HMRC that you no longer require to file your Self Assessment.
What Records do I need to keep?
It is essential that you provide accurate information when you submit your self-assessment returns.
To do this, you should have comprehensive records of all activities related to your self employed earning throughout the tax year.
Details of all of the invoices and business expenses from the previous tax year should be kept as a record of your self-employed income.
Documents that you should be keeping on file include:
- Self-employed income
- Income from employment
- Pension income
- Partnership income
- Payment on account
- Rental income
- Capital gains
- Pensions contributions
- Gift Aid
- Redundancy lump payment or unemployment benefit
You should keep a record of anything that you think is related to the income and expenses of your self-employed income. If you are unsure, you can seek advice from a professional accountant.
But the general advice is to take the safest option and keep anything that you believe relates to money going in or out of your business.
How is my Income Tax calculated?
Your income tax will be calculated on all profits that you earn. This means that all total income that is above your personal allowance is subject to tax.
You will need to submit the amount of money that you earn following the deductions of all business expenses.
If you are earning money from self-employment freelance work alongside your main job, your additional earnings may push you into a higher tax bracket. If your total earnings are above your current tax bracket, you will need to pay extra tax.
You can also reduce your tax bill by claiming expenses. If you have any business expenses, these can be offset against your self-employment income.
Employees who also do self-employed work
For employees that earn extra money from self-employed activities, you only need to pay tax earned from your self employed work.
All of the money earned from an employer will be calculated through PAYE.
If you need to find out how much you need to pay as an employee that also earns money through self-employed work, contact HMRC.
You can submit the amount from your P60 that you have been paid for the tax year along with how much you earned as a self-employed freelancer. The HMRC will use this information to calculate exactly how much tax you need to pay.
How Much National Insurance do I pay?
If you earn money from an employer and you are self-employed you will pay National Insurance for both sources of income.
The National Insurance for money that you earn through employment will be calculated by your employers PAYE accounts.
You will then need to pay self-employed National Insurance on your self-employed profits.
The amount that you need to pay for National Insurance will be calculated in your Self Assessment by the HMRC.
Should I put money aside for my tax bill?
If you want to avoid getting into trouble when the taxman asks you to pay your annual contribution, you need to think ahead.
You should also remember that you will be expected to pay half of the expected taxes that are required for the following year.
Most self-employed businesses save about 30% of their self employed earnings each month and keep it secure until it is time to pay their taxes.
If you have profits of over £60,000 then your tax bill will be higher, so you will need to put away more than 30% each month.
By setting up your business as a limited company, the tax that you pay could be less than that of a sole trader.
You should discuss your options with your accountant to see which option works best for you.
Do you need help with your self-assessment tax returns?
For most small businesses, completing their annual self-assessment tax returns is a difficult job that they don't need.
There is enough to do without the additional stress of compiling all of the information that the taxman expects from you.
For this reason, you can invest in a reliable bookkeeper to manage all of this information on your behalf. We will also be able to provide help and advice about your taxes whenever you need it.
If you live in the Redcar or North Yorkshire areas, our trained accountants can provide self-assessments, tax returns, payroll services and account preparations for when the HMRC requires them.
Penny & Pounds can help you fill out your self-assessment forms and ensure your financial information is correct for your annual tax returns January deadline.