The tax return self assessment process can seem daunting, but it doesn't have to be. With the right knowledge and expert support from Accountants in Bury, you can approach your tax returns with confidence. In this guide, we'll break down everything you need to know about tax return self assessment, and show you how to make the process straightforward and manageable.
What Is a Tax Return Self Assessment?
Tax return self assessment is a system introduced by HM Revenue & Customs (HMRC) that allows taxpayers to calculate and report their taxable income each year. If you need to submit a self assessment, you'll fill in an annual tax return detailing your income, expenses, and other relevant information. HMRC then uses this information to calculate your tax liability.
Key Features:
- A detailed form reporting your income and expenses
- Essential for those with multiple income sources
- A responsibility primarily for the self-employed, landlords, and individuals with untaxed income
Who Needs to Submit a Self Assessment Tax Return?
Many people pay their taxes directly through PAYE (Pay As You Earn). However, not everyone does (or can do) this, and those people who don’t will need to complete a tax return self assessment instead. Here's a list of who typically needs to file one:
Self-Employed Individuals
Individuals with other untaxed income, such as:
- Foreign income
- Income from trusts
- Capital gains from the sale of property or investments
Landlords
You must declare rental income from UK property if it exceeds £1,000 per year.
High Earners
This applies if your annual income exceeds £100,000 or if you receive income from multiple sources, such as savings or investments.
Directors
Directors of limited companies often need to file, especially if they receive dividends.
Partners in a Partnership
All partners need to submit a tax return in addition to the partnership tax return.
Other Income Sources
If you run your own business as a sole trader or are in a partnership, you'll need to file a self assessment.
Important Deadlines and Penalties
Key Deadlines:
- Registering for Self Assessment:
5 October following the end of the tax year. - Paper Tax Returns:
31 October following the end of the tax year. - Online Tax Returns:
31 January following the end of the tax year. - Tax Payments Due:
- First payment on account: 31 January
- Second payment on account: 31 July
Penalties:
- Late Filing Penalty:
- £100 fixed penalty for returns up to three months late
- £10 per day penalty (up to 90 days) if over three months late
- 5% of tax due (or £300 if greater) for returns six months late
- Further penalties for returns 12 months late
- Late Payment Penalty:
- 5% of the tax unpaid after 30 days
- Additional 5% penalties after six and 12 months
Avoid penalties by submitting and paying on time. If in doubt, consult our Bury professional accountants for advice.
Preparing for Your Tax Return Self Assessment
Gather Essential Documentation
Income Records:
- PAYE P60/P45 forms
- Self-employed business accounts
- Bank interest certificates
- Dividend vouchers
- Rental income statements
Expense Records:
- Business expenses
- Mileage logs
- Rental property expenses
- Charitable donations
- Pension contributions
Capital Gains Information:
- Sale proceeds and costs
- Improvement and acquisition costs
Other Relevant Information:
- Student loan repayments
- Child benefit overpayments
Create an HMRC Online Account
Ensure you have an active HMRC online account. Register in advance if you don't have one, as activation can take up to 10 days.
Check Your Unique Taxpayer Reference (UTR)
Your UTR number is essential for completing the tax return. Ensure that it's correct and that you have it to hand.
Completing Your Tax Return Self Assessment
The Online Process
- Login to Your HMRC Account:
Visit the HMRC website and log in using your credentials. - Choose "Complete Your Tax Return":
Start your online return. - Enter Your Information:
Follow the guided steps to enter income, expenses, and other relevant details. - Check and Submit:
Review your tax return carefully before submission to avoid errors. - Save a Copy: Download or print a copy of your completed return for future reference.
Sections of the Tax Return
- Personal Details:
- National Insurance number
- UTR
- Address details
- Employment Income:
- PAYE employment details
- Taxable benefits
- Self-Employment Income:
- Business income and expenses
- Profit and loss details
- Property Income:
- Rental income and expenses
- Profits from furnished holiday lettings
- Savings and Investment Income:
- Bank interest and dividends
- Income from trusts and settlements
- Foreign Income:
- Overseas employment
- Foreign dividends and interest
- Capital Gains:
- Property and asset sales
- Investment gains
- Other Income and Reliefs:
- Pensions and annuities
- Student loan repayments
- Pension contributions
Reviewing Your Tax Calculation
After completing your tax return self assessment, you can view an estimated tax calculation. Check this for any discrepancies before submission.
Common Mistakes to Avoid
- Incorrect Income Reporting:
Ensure all income sources are accurately reported. - Overlooking Allowable Expenses:
Claim legitimate business expenses and reliefs to reduce your tax bill. - Misclassifying Income:
Differentiate between income types, such as dividends and savings. - Missing Deadlines:
Submit your tax return and payments before the deadlines. - Incorrect Personal Details: Ensure your National Insurance number and UTR are accurate.
Tax return self assessment may seem like a challenging task, but it doesn't have to be.
FAQs About Your Tax Return Self Assessment
1. Do I Need to Submit a Tax Return if My Income Is Below the Personal Allowance?
You may still need to submit a tax return self assessment if you have untaxed income or are self-employed, even if your total income is below the personal allowance.
2. How Can I Correct an Error in My Submitted Tax Return?
You can amend your tax return online within 12 months of the original filing deadline.
3. What Expenses Can I Claim as a Self-Employed Individual?
Common expenses include:
- Office costs
- Travel expenses
- Advertising and marketing
- Professional fees
4. How Is a Partnership Tax Return Different?
A partnership tax return is completed by one nominated partner, but each partner must also file their own self assessment.
5. What Happens if I Miss the Payment Deadline?
HMRC will charge penalties and interest on unpaid tax. If you're struggling to pay, contact HMRC immediately to discuss a payment plan.
6. What Records Should I Keep?
Keep records of income, expenses, and any supporting documents, such as receipts or invoices, for at least five years.
7. What Is the "Payments on Account" System?
Payments on account are advance payments towards your next year's tax bill. They are based on your previous year's tax liability.
8. Can I File My Self Assessment Tax Return by Post?
Yes, but the deadline for paper returns is earlier than for online submissions. Paper returns must be submitted by 31 October.
9. How Long Does It Take to Receive a Refund?
Refunds usually take around 10 days if you file online and provide bank details.
10. Is Help Available for Completing My Tax Return?
Absolutely. Accountants in Bury can help simplify your tax return self assessment, ensuring everything is accurate and complete.
Conclusion
We hope that you see now how completing your tax return self assessment may seem like a challenging task, but it doesn't have to be. With careful preparation, timely submission, and support from our Bury professional accountants, you can easily navigate the process. Accountants in Bury are here to help, offering local accounting services in Bury to guide you every step of the way.
Connect with us on social media via Facebook, or schedule a meeting with our team to make your tax return journey stress-free!
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