Every year, most taxpayers in the UK have their taxes done by their employers, but if you are self-employed you are likely to have to submit a self-assessment tax return.
But who else needs to submit one?
A self-employed ‘sole trader’ must submit a self-assessment if earnings are above £1,000, before any tax reliefs, or they are a partner in a business partnership. You also need to submit a tax return if you claim income tax-reliefs, or to prove you are self-employed to claim tax-free childcare or maternity allowance.
There is also a group of employed workers who must submit a tax return and where just paying tax through PAYE is not enough. This is generally when people who are employed receive some extra income, such as from property rentals, having investment income, receiving foreign income, doing casual freelance earnings or other untaxed income. Often high earners over £100,000 on PAYE need to file a tax return as they are likely to be in a more complex financial position and it can affect your tax-free Personal Allowance, losing £1 of your tax-free Personal Allowance for every £2 of income over £100,000.
The most important thing to do if you think you might need to complete a self-assessment is find out sooner rather than later. The ideas below can help speed up the process.
- Give it priority and plan to have it done, we recommend doing it all in one attempt as it won’t take too long.
- Find and collect all relevant paperwork and information (if applicable) such as your business expenses, P60, P11D, P45, annual pension statements, interest earned on savings and accounts, gift aid payments, rental income from tenants and possible earned dividends.
- Gather your records from: National Insurance, Income Tax from Employments, Dividends Earnings, and Capital Gains Tax.
- Gift Aid – have you made any charitable contributions? These might be included as you would get tax relief on them.
The next self-assessment tax return is for dates between 6 April 2020 to 5 April 2021, and tax must be paid before 31 January 2022. Last year, there were 700,000 taxpayers racing for the deadline because they left it to the last day and 26,500 people submitting in it in the last hour of the last day. Although many people leave it to the last minute, there is a growing trend of filing early. The number of customers choosing to file on the first day of the new tax year almost tripled from almost 23,000 in 2017 to nearly 64,000 in 2021. There are fines for submitting late, even by a day, or by submitting incorrect information. Which statistic do you want to be?
To find out more information and help you submit your self-assessment, get in touch with your local AIMS Accountant.