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What Can You Claim Back On Self Assessment

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  • 07-03-2024
What Can You Claim Back On Self Assessment

Have you been asking: What can you claim back on self assessment? Discover the key expenses you can claim back on your self-assessment tax return, including home office costs, travel expenses, and professional fees. 

What can you claim back on self-assessment?

HMRC has a wide variety of permissible expenses that you can claim to reduce your tax bill. Business expenses are a crucial element to remember when calculating these expenses. They include costs associated with running your business efficiently.  This encompasses office rent, utilities like electricity, stationery supplies, and subscriptions for software necessary for your operations.

If you are a home-based worker, it's important to note that portions of your council tax, heating, electricity and phone bills can also be calculated as allowable expenses. These are costs incurred in the course of running your business from the comfort of your home. Another significant claim that tends to get overlooked is the mileage allowance.

If business tasks require you to use your vehicle for travelling, the cost used for fuel consumption and general car upkeep can be calculated as expenses. For instance, HMRC permits you to claim 45p for every mile covered for the first 10,000 miles in a tax year. Furthermore, professional service costs, such as accountants' fees, fall under the class of expenses you can claim back on your self-assessment tax return.

Other costs that can potentially be claimed are the expenses for buying goods for resale, wages and salaries of employees, and the interest paid on business loans. A self-assessment form needs to be completed annually and it's vital to maintain an accurate record of all expenses claimed. Maintaining a clear and comprehensive record not only saves time but also mitigates the risk of inaccuracies that could arise from a haphazard record-keeping system. 

Is self-assessment the same as a tax return?

"Self-assessment" and "tax return" are two terms that often get mixed up, leading to a lot of confusion. However, they have different definitions. Essentially, self-assessment is a method employed by HMRC (Her Majesty's Revenue and Customs) to gather Income Tax.

This process involves the submission of a tax return. Meanwhile, a tax return is a formal document that you complete to report your earnings, claim allowances, and obtain relief.

In other words, it's a definitive statement of your income and potential deductions, which is then used to calculate your tax obligation for a specific tax year. To carry out this process, you need to fill out specific forms detailing your earnings.

These forms are used to work out the total amount of tax you owe and to ensure that your bill gets paid. This is a formalised system, with firm deadlines and strict penalties for tardiness in file submission and payment.

What Can You Claim Back On Self Assessment?

Therefore, it's essential to stay on top of your responsibilities to avoid breaching any rules set by HMRC. Remember, errors or lapses in this process could potentially lead to hefty penalties or legal troubles. Therefore, to avoid any such risks, it's crucial to understand the difference between self-assessment and tax returns and the respective obligations and processes associated with each. To sum it up, 'self-assessment' refers to the system utilised by HMRC for tax collection, and this involves the filing of a 'tax return.'

Given the strict rules around late filing and payment, it's vital to keep an eye on your obligations to avoid violating HMRC regulations. Hence, tracking your income, understanding the amount of tax due, paying your bills on time, and completing and filing your tax return correctly and timely could save you a lot of trouble and ensure compliance with tax laws. Clearly, understanding the difference between self-assessment and tax returns is crucial in successfully navigating the UK tax system.

How does HMRC know how much I earn?

Are you curious about how HMRC determines your earnings? The answer can be found in the data it gathers from a variety of sources. Employers and pension providers, for instance, provide details about your income through the Pay As You Earn (PAYE) system. Similarly, banks and financial institutions disclose any interest or other income from your financial investments.

One important part of the process involves you completing a self-assessment tax return. In this document, you formally declare your income from multiple sources. These may include employment, self-employment, rental income, dividends and many other ways of generating revenue. 

Providing accurate information when completing your self-assessment tax return is essential. Any discrepancy between the income you report and the data held by HMRC from employers, pension providers and banks can lead to penalties.

HMRC has a duty to ensure that everyone contributes fairly to the public purse, which is why it gathers so much data about individual earnings. By checking the information it knows about you against the self-declared data in your tax return, HMRC works to ensure that everyone pays the right amount of tax. 

In conclusion, your interaction with HMRC isn't just a one-way street. You play an essential part in establishing what you earn, ensuring the HMRC has an accurate picture of your income. It is important to remember, that your honesty matters not only to you but also to the whole UK economy.

How do HMRC detect undeclared income?

The system employed by HMRC to track irregularities in the declaration of income is incredibly sophisticated and incredibly efficient. Their robust mechanisms have been designed carefully and methodically to detect undeclared income, going to great lengths to ensure that all income declared and taxes paid are accurate and correct.

This impressive system has the ability to cross-check data from multiple different sources. This means that HMRC can draw comparisons between different sets of data to spot any inconsistencies, discrepancies, or out-of-place information that may indicate undeclared income.

Not only is this system highly accurate in finding anomalies in data, but it also retains the ability to act upon these irregularities. If any disparities are found, HMRC has the power to proceed with audits or investigations to further examine the situation. Detection of undeclared income doesn't solely rely on the robust HMRC system.

How Do Hmrc Detect Undeclared Income?

External factors can also initiate an investigation. Whistle-blowers, anonymous tip-offs, or just a hint of suspicion can result in an examination of an individual's financial records. The repercussions of failing to declare your income accurately can be very serious. 

The financial penalties that HMRC can impose are heavy and can significantly impact an individual's financial stability. Therefore, it is imperative to declare your income accurately and pay the tax that is due, as this helps to maintain the fairness of the UK's taxation system.

Can I do a self-assessment if I'm not self-employed?

The misconception that self-assessment is only for the self-employed is common. In reality, the process of filing a self-assessment isn't limited solely to those who run their own businesses. Even if you're an employee working in a company, certain scenarios may necessitate the completion of a self-assessment tax return. 

 For example, if you have rental income, it implies that you're earning income from a property that you rent out. This income won't be accounted for in the pay-as-you-earn (PAYE) system, therefore, it needs to be declared separately.

Similarly, if you earn money from a hobby, this could be anything from selling handmade jewellery to tutoring on weekends, or if you have substantial Savings and Dividend income, it needs to be reported. That money over certain levels isn't automatically taxed, hence, it's crucial to report it in a self-assessment tax return.

It's important to remember that it's your responsibility to inform the His Majesty's Revenue and Customs (HMRC), the government department responsible for collecting taxes if you believe you need to complete a tax return. If you don't, you might face penalties which could cause financial strain or could get you into legal trouble. Even if the idea of self-assessment seems daunting, it doesn't need to be if you understand what's required of you.

Doing a self-assessment involves collating all relevant financial data, including income and capital gains, and defeating allowable expenses. It also means being aware of any special allowances or reliefs that you may be eligible for, as these can decrease your overall tax liability. Whether you are self-employed or an employee, it is essential to be clear and diligent with your tax requirements.

Are you looking for self assessment accountants in Redcar, Middlesbrough and North Yorkshire? Penny & Pounds can help you organise your bookkeeping and accounts.