Over 750,000 people in the UK submit their Self Assessments on January 31st – and almost 33,000 submit it in the last hour! Too many self-employed people don’t realise that the 31st January is also the deadline for making your final tax payment. If you don’t, you will land yourself a nice, fat fine from HMRC.
Here are ten last minute tips to help you submit your Self Assessment and save you all the stress.
1. Register for self-assessment with HMRC
Our very first tip is to make sure that you’re registered with HMRC. It is not possible to file your tax return unless you have a ten digit unique taxpayer reference (UTR). This number is automatically issued to you when you register as a self-employed citizen. Even if you are only working part-time, you must still register, no matter how small your income may be in the early days.
Contact your tax office or the self-employment helpline on 0845 915 4515. Alternatively, you can register online at https://online.hmrc.gov.uk/registration/options
You may also need to tell the tax credits office (it’s a different department). Definitely do this if you already claim, as any change in circumstances needs to be reported to HMRC as soon as possible.
2. Understand the deadlines
Knowing for which tax year you are gathering your information can be confusing – especially if your accounting period isn’t the same as the standard tax year (April to April). Taking into account the wrong documents (invoices and receipts) for an accounting period is one of the most common errors sole traders make!
Assuming your accounting period is April to April, in January 2018 you’ll be reporting on your business activity that occurred between 6th April 2016 and 5th April 2017.
Finally, remember: based on the above detail, you are already three-quarters of the way through the current tax period (the deadline for submitting for this one is 31st Jan 2019!). So make sure you are recording all your income and expenses now to cut down the amount of work you have when you submit your next tax return for the period 6th April 2017 to 5th April 2018.
More info here: https://www.gov.uk/self-assessment-tax-returns/deadlines
3. Register for online submission
If you are new to being self-employed, you can avoid one of the biggest mistakes people make – forgetting to register for online submission. Don’t delay, register with HMRC now to file your self-assessment online (this is not the same process as registering as self-employed – which we covered in point 1). The good news is that HMRC has a new, faster online process for registering. Simply head over to GOV.UK. Verify to register and access your online tax account.
If you are already registered, make sure you know your login details because if you don’t, you’ll have to reset them – which is a hassle you don’t need! It is a good idea to fish out your login details and check that you’re able to login using them right now. If they don’t work, make sure you go to GOV.UK. Verify to reset them.
4. Get all your paperwork in place
The key to getting your self-assessment submission accurate is to make sure you have all the correct paperwork within easy reach. A good starting point is to make sure you have all your income and expenses recorded in one place. Some people write it in a book, some type it into spreadsheets or enter it 1tap receipts and 1tap tax to collect as much detailed and accurate information as possible.
Keeping good, clear records makes it a whole lot easier to complete your self-assessment and ensures that you don’t end up paying too much tax – or a fine for filing late!
And remember, although you shouldn’t make a habit of it, if you are in the unfortunate position of finding you are missing receipts or invoices, you can refer your online bank statements as evidence of transactions and make sure you can provide robust evidence such as date, amount, place and reason.
5. Know how much tax you have to pay
Do you know how much you have to pay this year? Accountant Jason Cannon from weekly 1tap live Facebook sessions recommends putting aside 20% of all your income so you don’t get a nasty surprise at the end of the year. If you are not comfortable with guesstimating it, you may choose to use 1tap tax, a sister app to 1tap receipts which lets you record your income as you go and calculates how much tax you owe at any time.
6. Identify your allowable expenses
One of the biggest causes of paying too much tax is not claiming enough allowable expenses. We have all been through the dilemma of trying to decide what expenses we can and can’t claim.
As a rule of thumb, you can claim expenses for anything directly related to the running of your business. However, while marketing material, office equipment and stationery are pretty obvious business expenses, mobile bills and use of home can be a little more complicated, so it is no wonder so many people end up unsure and don’t claim enough. We’ve put together the Expense Guide to Saving Tax to help you identify expenses you should be claiming.
7. Don’t lose your receipts
Another major reason why people overpay their taxes is because they lose their receipts. No receipt, no tax claim. As soon as you purchase something for work you can photograph it in 1tap receipts. The app will extract the data, automatically allocate the items into the correct HMRC categorise and pre-fill the Self Assessment form. The app also keeps the receipts in the cloud for 6 years – HMRC’s requirement. If your business gets audited and you don’t have a receipt from 5 years ago on hand, you can face a fine.
8. Get professional advice
Most of you are not accountants. But doing your line of work as a self-employed person requires you to be financially responsible for your job. If you’re not comfortable with it, you must seek professional advice. You can pay an accountant to double check what you’re doing. We’ve got some last minute accountant packages, check them out here.
9. Be financially proactive everywhere you are
You are responsible for your receipts. Losing them is not an option. You must put those receipts in a safe place, every time. Whether it’s a shoebox, an envelope or a vault, they must be submitted to your accountant, you must enter them into a spreadsheet, or you can photograph them using 1tap receipts app to get the Self Assessment form updated for you. Another way to enter them into 1tap is using your computer (desktop or laptop) and you upload your photos into 1tap online from there.
10. Break down the workload into manageable pieces
Set aside a block of time to do your tax return. You are actually able to fill out part of your tax return and save your progress while you’re filing it online. You can do it in small sections.
11. Get educated – knowledge is power!
You don’t have to hold an accounting degree, but basic accounting knowledge is what every self-employed person should have. You will find a mountain of resources online. It’s true there is a lot of noise in those resources and finding relevant stuff is key. You may find some good info with us. Join our weekly 1tap live sessions on Facebook. Every week a new accountant is interviewed on topics suggested by the viewers of the previous week and often we feature self-employed people from all sorts of professions. You also get an opportunity to ask them questions.
12. Don’t forget to pay
Once you’ve submitted your tax return, don’t think you can switch into party mode! Your work is only half done. The deadline for paying your tax is the same as the final submission deadline – 31st January 2018. HMRC doesn’t deduct your tax from you automatically, so you’ll need to make a payment.
You can pay your tax bill by debit or credit (an online payment) or go to the government office to submit a cheque. Then when you’re finally done, it’s time to party!
13. Notify HMRC if you’re not able to pay
If for some reason, you’re not able to make the payment to HMRC, it is wise to let them know right away. In exceptional circumstances (and be aware that they do have to be exceptional), they might give you some extra time to submit the tax bill amount or let you pay it in smaller installments instead.
As with many of the points above, the sooner you identify the issue and let HMRC know, the less likely you are to end up out of pocket.
14. Don’t make the same mistake again!
Learn from your mistakes. Here are a few things you need to start with right away for the next tax year:
- Do your admin as you go – Don’t let it pile up over the year leaving you a mammoth task over Christmas. Download 1tap receipts and start photographing your receipts the minute you buy something for work.
- Create separate business and personal bank accounts – It makes things so much easier if you keep your business and personal finances separate.
- File your invoices – Number them, keep in date order and mark them as paid when you receive your money.
- Organize your expense receipts – As with your invoices, keep them in some sort of order. Put the details into a spreadsheet or use an expense app to do it for you.
- Back up invoices and expenses on cloud – You need to keep your business paperwork for 6 years for HMRC. Paper copies get lost easily and are hard to manage, so why not digitise them and save them safely and securely in the cloud?
- Calculate your business income and expenses regularly over the financial year – The best thing you can do to avoid any nasty tax-bill shocks is to regularly make a quick check on your income vs expenses. It won’t give you a 100% accurate picture, but you’ll certainly get a good idea if your tax bill is going to be large or small.
- Get professional advice – Get it either from our contacts or on your own. If HMRC suspects your tax return smells fishy and they want to investigate and your books are not in order – you will be responsible and be held accountable.