How to File Self Employed Tax Return Forms: A Handy Guide

Are you one of the millions of entrepreneurs who need to complete a self-assessment tax return every tax year? Perhaps you’re new to the world of self-employment and unsure about how to declare your income tax and national insurance contributions? Maybe you’re a gig economy worker, trying to understand your unique taxpayer obligations?

This guide will help you navigate the complexities of self-assessment, ensuring you pay the right amount of tax and avoid costly mistakes.

What Is a Self-Employed Tax Return?

Self assessment tax is a system used by HM Revenue and Customs (HMRC) to collect income tax from individuals and businesses with income that isn’t automatically taxed. This includes earnings from self-employment, capital gains, dividends, and other sources of untaxed income. Understanding the ins and outs of self assessment tax is crucial for accurate reporting and avoiding potential penalties.

A Self Assessment Tax Return, often referred to as just ‘self assessment’, is a system used by HM Revenue and Customs (HMRC) to collect Income Tax. It’s a form that you submit to HMRC annually if you owe tax on income that isn’t automatically taxed, such as earnings from self-employment, capital gains, or dividends.

Unlike the Pay As You Earn (PAYE) system where tax is deducted automatically from wages and pensions, the self assessment system requires you to manually report your income. It’s essentially a way of declaring your taxable income to HMRC, and it’s crucial for ensuring you pay the correct amount of tax each year.

The process of completing a self-assessment involves filling in the form after the end of the tax year it applies to. The deadline for submitting a self-assessment tax return online for the UK is midnight on January 31st following the tax year in question. The tax year runs from April 6th to April 5th of the following year. It’s important to understand that failing to file and pay on time can result in penalties, including interest charges.

Who Needs to Pay Self-Assessment Tax?

You will need to pay self-employed income tax or self-assessment tax if you fall into one of these categories:

• Self-employed individuals earning more than £1,000 before deductions.
• Employees or pensioners earning £100,000 or more in the last tax year.
• Anyone earning £10,000 or more from savings interest or investment income.
• Individuals with untaxed income of £2,500 or more, such as from tips or commission.
• Higher or additional-rate taxpayers who need to claim tax relief on pension contributions.
• Individuals who owe capital gains tax from selling assets at a profit.
• Anyone receiving child benefit with an income over £50,000 (£60,000 from 2024-25).
• Individuals with taxable income from abroad, or those living abroad but receiving income in the UK.
• State pension recipients whose payments exceed their personal allowance and it’s their only source of income.
• Directors of a limited company, business partners, trustees of a registered pension scheme or other trust.
• Individuals who received a P800 form from HMRC indicating they didn’t pay enough tax last year and haven’t yet paid the outstanding sum.

Registering for Self Assessment

Registering for Self Assessment can seem daunting, but it’s actually a straightforward process. Here’s a step-by-step guide on how to register:

• Visit the HMRC website: The first step to register for Self Assessment is to visit the HMRC website. This is where you’ll create your Government Gateway account.
• Create a Government Gateway account: Here, you’ll need to provide some basic information about yourself and your business. This is a crucial step as this account will be your portal for all your tax affairs.
• Receive your Unique Taxpayer Reference (UTR) number: After creating your account, you’ll receive your UTR number. This is a unique number assigned to you by HMRC, which you’ll use for all your tax dealings.
• Receive an activation code: Once you’ve received your UTR number, you’ll also receive an activation code. This code is used to log into your account for the first time.
• Complete the registration form: The final step is to complete the registration form. This will include information about your business and your income.

Using the Online Portal for Registration

The online portal is a convenient way to register for self-assessment. To start, visit the HMRC website and create a Government Gateway account. This account is your access point for all online tax services. Once you’ve set up your account, you’ll receive your Unique Taxpayer Reference (UTR) number. This is a unique identifier that HMRC uses to track your tax records.

Once you have your UTR, you’ll receive an activation code to log into your account for the first time. This code is sent via post, so it’s important to keep an eye on your mail. After receiving the code, you can complete the registration process.

It’s worth noting that if you’ve submitted Self Assessment tax returns before, you’ll need your old UTR to register and set up the account. .

Key Deadlines for Self Assessment

Here are the key deadlines for self assessment that you need to keep in mind:

5th October: This is the deadline to register for self-assessment for the first time in the tax year. If you’ve started trading as self-employed, make sure to get yourself registered by this date to avoid penalties.

31st October: If you’re filing a paper tax return, this is your deadline. It’s crucial to get your documents in order before this date to ensure a smooth submission process.

31st January: This is a significant date in the self-assessment calendar. It’s the deadline for filing your online tax return and making your first payment on account. This payment will be half of your previous year’s tax bill. For example, if your tax bill for the previous year was £2,500, your first payment on account would be £1,250. If you miss this deadline, you’re looking at an automatic £100 fine, which can increase over time. Six months later, by the 31st of July, your second payment on account is due. This will also be half of your previous year’s tax bill. So, in our example, you’d be expected to pay another £1,250.

These deadlines apply to the tax year, not the calendar year. The tax year runs from 6th April to 5th April of the following year. The deadline for registration is October 5th in the second tax year you need to file a Self Assessment return, not necessarily your business’s second year of operation. For example, if you became liable to file in the tax year ending April 5, 2024, the registration deadline would be October 5, 2025. Don’t miss it! The whole process could take up to 20 working days, so it’s best not to leave it until the last minute.

How to File Your Self Employed Tax Return

To file your Self Employed tax return, follow these steps:

• Register for Self Assessment: If you’re filing for the first time or didn’t send a return last tax year, you must register for Self Assessment. This is a crucial first step in the process.
• Gather Your Documents: You’ll need your ten-digit Unique Taxpayer Reference (UTR), National Insurance number, and details of your untaxed income from the tax year. This includes income from self-employment, dividends, and interest. Also, gather records of any self-employment expenses, contributions to charity or pensions eligible for tax relief, and your P60 or other records showing taxed income.
• Understand the Form: It’s essential to understand what you’re being asked for on the form. The HMRC help sheets can be a valuable resource in this regard. (You can also ask your accountant to assist, if you have one).
• Complete the Form: Whether you’re completing the Self Assessment tax return online or on paper, ensure you fill in all the necessary fields accurately.

Filing your Self Assessment tax return is more than just a legal obligation. It’s your opportunity to account for the tax you owe and ensure you’re paying the correct amount. Mistakes can be costly, so take the time to get it right. If you’re unsure about anything, seek professional advice.

Making Payments on Your Tax Bill

Once you’ve followed all of the necessary steps, you have to make payments. The first step is to understand what ‘payments on account’ are. Essentially, these are advance payments towards your next tax bill, calculated as half of your previous year’s tax bill. These payments are made twice a year, on 31st January and 31st July.

For instance, if your tax bill for the previous year was £1,500, you would make two payments on account of £750 each. These payments are then deducted from your next tax bill. If your tax bill is less than the payment made, HMRC will refund you accordingly. Conversely, if your tax bill is more, you’ll need to pay the remaining balance.

It’s important to note that payments on account don’t include National Insurance contributions or Capital Gains Tax. These need to be paid in full by the 31st January deadline. If you’re late with your payments, you’ll face the same fines as if you’d missed the tax deadline.

How to Declare Other Income on Your Self Assessment

When it comes to declaring other income on your Self Assessment, there are a few key steps to follow:

• Identify Your Other Income: This could be anything from capital gains to untaxed income such as tips or commission. If you’re unsure about what counts as other income, it’s always a good idea to contact HMRC for clarification.
• Fill in the Relevant Supplementary Page: Depending on the nature of your other income, you may need to fill in a specific supplementary page. For example, if you’re declaring capital gains, you’ll need to fill in page SA108.
• Declare Any Allowable Expenses: If you’ve incurred any expenses related to your other income, these can be declared and deducted from your tax bill.

If you think you’ve paid too much tax in the past, you can also claim tax relief. It’s essential to keep accurate records of your income and expenses to ensure you’re paying the correct amount of tax. If you’re unsure about anything, don’t hesitate to contact HMRC for assistance.

How to Appeal Against a Penalty

If you’ve missed your Self Assessment deadlines and incurred a penalty, it’s not the end of the world. There are steps you can take to appeal against the penalty:

• Identify the Reason for Your Delay: The first step is to identify a valid reason for your delay. HMRC only accepts certain reasons, such as serious illness or bereavement. “I didn’t have time” or “it slipped my mind” won’t cut it.
• Contact HMRC: Once you’ve identified a valid reason, contact HMRC as soon as possible. Explain your situation and why you missed the deadline. It’s crucial to be honest and upfront about your circumstances.
• Submit an Appeal: If HMRC accepts your reason, you’ll need to formally submit an appeal. This can be done online or by post. Make sure you include all relevant details and evidence to support your claim.
• Wait for a Decision: After submitting your appeal, you’ll need to wait for a decision from HMRC. This can take several weeks, so be patient.

The best way to avoid penalties is to meet your Self Assessment deadlines. Mark your calendar for the tax year end, first payment, balancing payment, and second payment on account. Stay updated on any changes in April and ensure you submit your tax return on time.

Where to Find Help with Self Assessment or Self-Employment Tax

The first place to look for help with your self assessment tax return is the GOV.UK website. It has a wealth of information and downloadable help sheets that can guide you through the process.

Next, you can find assistance directly on the HMRC’s online Self Assessment form. Simply click on the ‘?’ next to different fields for explanations and guidance.

If you prefer a more hands-on approach, consider using a tax calculator. Tools like the one offered by Which? can help you submit your information online and calculate your tax bill.

Lastly, don’t overlook the value of professional advice. Hiring a tax advisor or accountant can be a wise investment, especially if your financial situation is complex. They can help ensure you’re claiming all the allowances you’re entitled to and avoid costly mistakes.

Wrapping Up Self Assessment for the Self-Employed

Understanding and managing your self-assessment tax returns as a self-employed person is crucial. It’s not just about knowing when to make payments on your self employment income or how much to pay, but also about understanding your personal allowance, taxable income, and tax relief options.

Remember, if you’re unsure or need assistance, you can always lean on Mazuma Money. It’s about ensuring you’re paying the right amount of tax, not paying too much or too little. Get a quote on your self-assessment tax return in under 30 seconds for complete peace of mind!