How to Complete an Income Tax Self-Assessment
Nobody likes tax returns. But neglecting a self assessment form will see you in hot water. Read our guide and ensure there's no hiccups
Completing a self-assessment can be a daunting prospect for many, especially if you lack a natural aptitude for numbers.
Unfortunately, for the majority of people working in business, it is a prospect you are likely to face.
However, provided you keep comprehensive and relevant records, and meet your deadlines, it doesn’t have to be something to fear.
This guide will help you both recognise your obligations as a small business as well as teach you how to keep detailed records to ensure you submit your return without any problems.
Am I affected by self-assessment?
You are responsible for performing your own self-assessment if:
- You are a sole trader
- You are in partnership
- You are a company director who receives benefits or remunerations
- You are a higher rate tax payer with a higher-rate taxable income
- You receive untaxed income
- You receive an income of over £100,000 annually
- You have complex tax affairs
- You have an income from investment, savings and property in excess of £10,000 before allowable expenses reductions, or £2,500 afterwards.
- You claim child benefit and have an income larger than £50,000.
What are my obligations?
You can submit your tax return either by paper in the post, or by filing it online.
You must submit your paper tax return by the October 31 – Submitting your return at a later date will incur a £100 late filing penalty.
You must submit your online tax return by the January 31 – Submitting your return at a later date will incur a £100 late filing penalty.
You must submit your return by the December 30 if you owe less than £3,000 and wish it to be collected via a PAYE code reduction for the following year.
You must keep records to corroborate your tax return information.
If you are not responsible for running the business yourself, you need to keep the records for one year following the Jan 31 deadline.
If you are self-employed, in partnership, or if you lease property, you will need to keep them for at least five years.
The HMRC should send you a tax return every April or May. Even if they do not, it is your responsibility to request one.
You need to inform the HMRC within six months of the end of the tax year if any income you received was untaxed, if you need to pay a higher-rate of tax than you are currently paying on forms of income or if you received income by selling assets and have not paid any capital gains tax.
What must I complete on the return?
Every valid payee must complete the main six-page tax return (on paper or online), which covers:
- Savings and investment income.
- Tax allowances and reliefs.
- State benefits.
You will also need to complete any relevant supplementary pages, depending upon your individual circumstances.
If you were an employee, complete the employment section. If you held more than one job during the tax year, you will need a separate form for each one.
If you were a sole trader or had any form of self-employment income, complete the self-employment section. I.e. if you performed freelance or consultancy work.
If you were in partnership, complete the partnership section. In addition, one member of the partnership must complete a partnership return.
If you received income from a rental, complete the UK property section.
If you received income from overseas (e.g., from investments, benefits, pensions and rents), complete the foreign section. Only complete the overseas employment section unless you have been taxed both at home and abroad and wish to reclaim.
If you received income from a trust fund, complete the trusts section.
If you sold off assets worth in excess of £42400, complete the capital gains section. Only complete this form if they were assets used for business, rather than private possessions.
If you lived or worked abroad in the past year, complete the residence section.
How do I keep records to support my tax return information?
As an employee
If you’re an employee, most of the information can be obtained from your employer.
You will need three things:
- P60 – This shows the amount of NI and income tax you have paid, and should be provided to you by the 31st of May of every tax year.
- P11D/P9D – This shows whatever expenses or employee benefits you receive, and should be provided to you by the 6th of July of every tax year.
- P45 – (This only applies if you have left a job within the tax year.)
If you are self-employed, or in partnership, you will need to keep and submit copies of:
- Your P&L accounts.
- Your balance sheets.
- Your income and expenses information from the previous accounting period.
- Your ‘statement of account’. This will show how much tax you have paid already.
If you have investments or savings, keep and submit copies of:
- Your annual investment statements from unit and investment trust companies. You do not, however, need to declare ISAs and PEP investments.
- Your statements and passbooks from banks and building societies. You can receive tax deduction certificates from accounts that pay interest net of tax.
- Your dividend tax vouchers.
If you pay into a personal pension plan, keep and submit a copy off:
- Your annual contribution statement. Get this from your plan provider.
How you complete the return will depend on whether you are submitting by paper or online.
Submitting a paper return by post
If you are submitting a paper return, start off by using pencil. Review and correct your entries and once you’re sure they’re correct, go over them in a pen.
Make use of the additional information boxes and write down anything you think is relevant – especially if you are unsure about your original answer.
Include all relevant and requested paperwork and use registered post to send it. This will allow you to keep track of the submission and receive a receipt of submission from the HMRC.
Submitting a tax return online
Make use the HMRC’s online self-assessment service as it can tailor the return to suit your circumstances, helping you answer only the relevant sections.
Use computer software and make sure to choose a program that allows you to save, change and delete entries. This will allow you to adjust and review your data prior to submission.
Once you’ve submitted the return online, a receipt will automatically be returned for you to keep in your records.
You must then wait for the HMRC to check for any mistakes, calculate the bill, and inform you of any plans they have to make and enquire about your return.
Where can I get help?
You can contact HMRC by phone (0845 900 0444) or online for help with filling in your assessment.
Alternatively, your accountant or tax advisers can help you calculate your bill and pay the correct amount.
Check they are a member of a relevant accountancy or taxation association/institute.
Remember that, regardless of whatever help you receive, the responsibility for day-to-day paperwork and bookkeeping is still your own.