So, you’re in business, you’re making some money – unfortunately you now have to pay tax. It’s daunting to have to do a tax return yourself. You could pay an accountant. Or you can learn how to do it. Here’s our ten step guide to help you.
1. Tell the taxman you are self-employed
HMRC may have already asked you to complete a self-employed tax return. In which case you will have a unique taxpayer reference (UTR). If not, you must register as self-employed. You need to do this by 5 October, after the end of each tax year (April 5)
2. Register for online HMRC services
You’ll be sent a UTR by post and you use this to register with HMRC for their online services, which include self-assessment. The Government Gateway will then send you a code to activate your account.
3. Keep records
You’ll make things much easier if you keep records as you go along. Basically you have to tell HMRC all your outgoings and these are set against how much you have earned.
4. Meet the submission deadline
January 31 is the deadline for online returns. BUT waiting till then will result in stress, panic and possibly a penalty. Many people leave this task until the last minute. That means thousands of people all trying to submit at the same time, resulting in delays and sometimes crashing the HMRC system.
5. Keep passwords safe!
As with all passwords, keep HMRC ones safe. Otherwise, you will have to get new ones and that can take up to 14 days. If you’ve ignored point 4 above, you’re in trouble!
6. Supply your business details
Before you start, make sure you have:
- Your National Insurance number
- Your UTR (see above)
- Basic details about your business (date you started, trading name, etc)
7. Have information ready
Things will be easier if you have details of:
- All allowable expenses (see point 8 below)
- Details of all income (your sales) to the business
- Any other income you get from building societies/banks/shares
8. Claim for allowances
Briefly, any stock you have to buy, car expenses, rent, utilities (even if you run your business from home) are allowed. Private expenditure, daily household expenses and whatever you pay yourself or any employees, are not allowed.
9. Fill in the Short Tax Return
If your earnings are below £70,000, there is a short version of the tax return you can use. There are also guidance notes to help you. Read these before you start to fill in the form.
10. Attend an HMRC Business Support Workshop
If this all still seems too daunting, you can attend workshops run by HMRC. These cover a variety of issues on self-employment, including self assessment tax returns. Find out where they are running in your area by calling 0845 603 2691, or search for Business Education and Support Teams on the HMRC website.