Completing and filing a self-assessment tax return is an essential task for individuals with non-standard income sources in the United Kingdom. Before you can submit your tax return, you will need to register for self-assessment. For more information on this, please read our article: How do you register for self-assessment?
Accurate and timely submission ensures you meet your tax obligations and avoid potential penalties. This comprehensive guide will help you understand how to complete and file a self-assessment tax return.
Preparation for completing your self-assessment tax return
Gather the required documents and information
Gathering required documents and submitting them to an accountant in a timely manner helps them prepare your accounts sooner, allows you to plan for the payment of your tax liability, and make pension contributions to reduce your tax bill.
Before starting your self-assessment tax return, gather the following personal information:
- National Insurance number
- Unique Taxpayer Reference (UTR) number
- Government Gateway login details (for online submissions)
You’ll need to compile relevant financial records, which may include the following:
- P60: End of Year Certificate, if you have employment income
- P11D: Benefits and Expenses, if applicable
- Records of self-employment income (e.g., invoices, bank statements)
- Records of rental income and associated expenses
- Interest, dividends, and investment income statements
- Pension contributions and pension income
- Records of any other income sources
Although you are not required to send these documents to HMRC, you are legally obliged to keep these records safe for six years as the HMRC may need to see them if it conducts an audit.
Expenses and deductions
Gather documentation for any allowable expenses and deductions, such as:
- Work-related expenses (e.g., equipment, materials, marketing costs).
- Home office expenses (e.g., rent, utility bills, insurance). You can only claim for the part used for the business.
- Travel expenses (e.g., mileage, public transport costs). You can only claim for the mileage used for the business.
- Professional fees (e.g., accountancy services, professional memberships)
- Charitable donations
Although you are not required to send these documents to HMRC, you are legally obliged to keep these records safe for six years as the HMRC may need to see them if it carries out an audit.
Understand tax deadlines
Familiarise yourself with the relevant deadlines:
- Paper tax return deadline: 31st October following the end of the tax year.
- Online tax return deadline: 31st January following the end of the tax year.
- Payment deadlines: Payments on account are due by 31st January and 31st July, while the balancing payment is due by 31st January following the end of the tax year.
Online vs paper tax return submission
Advantages of online submission
Submitting your tax return online offers several benefits, including:
- Extended deadline for submission (31st January instead of 31st October)
- Faster processing of your tax return
- Immediate confirmation of receipt
- Automatic calculation of tax owed or refund due
- Ability to track the status of your return and any repayments
How to choose the best method for your circumstances
Consider factors such as your preference for digital or paper records, the complexity of your tax situation, and the time available before the deadline when choosing between online and paper submissions.
Completing Your self-assessment tax return: Step-by-step guide
Register for HMRC’s online services (if filing online)
If you haven’t already, register for a Government Gateway account and activate the online self-assessment service using the activation code sent by HMRC.
Access the self-assessment form
Log in to your HMRC online account (for online submission) or obtain the appropriate paper form (SA100) from the HMRC website.
Complete the form with relevant information
Fill out the self-assessment form, providing the following details:
Personal details: Include your name, address, National Insurance number, and UTR.
Income sources: Report all income sources in the relevant sections, such as employment, self-employment, rental income, investments, and others. Following are details of different types of incomes to report.
Different Types of Income to Report
If you’re self-employed as a sole trader or partner in a partnership, you’ll need to report your business profits. This is calculated by subtracting your allowable business expenses from your total income (e.g., sales, fees, commissions). You should maintain accurate records of your income and expenses to make this calculation easier.
If you receive income from renting a property, you must report this on your tax return. You should include the gross rental income received during the tax year and any allowable expenses associated with the rental property.
Interest, dividends, and investments
Any income generated from your investments, such as bank interest, dividends from shares, or income from unit trusts, must be reported on your tax return. You should receive documentation from your financial institutions detailing this income, which can be used to complete the relevant sections of your tax return.
If you are a UK resident and receive income from overseas, you may be required to report this on your tax return. This can include employment, rental, or investment income from foreign sources. Depending on your residence status and any double taxation agreements in place, you may receive a credit for foreign tax paid against your UK tax liability.
Other income sources
Other income sources that may need to be reported include pension income, state benefits, royalties, or income as a trustee. Ensure you review all sources of income when completing your self-assessment tax return.
Allowable expenses and deductions: Claim any allowable expenses and deductions in the corresponding sections of the form. It is crucial to claim all business-related expenses to reduce your tax bill. These include purchasing goods for resale, rent, rates, repairs, insurance, utility bills, interest paid on business loans, lease payments on machinery and vehicles used for business, accountancy fees, etc. The following are different types of expenses you can claim.
Different Types of Claiming Allowable Expenses
- Work-Related Expenses
You can claim expenses incurred for the purpose of your business or trade. Examples include:
- Equipment and tools
- Marketing and advertising costs
- Insurance premiums
- Professional subscriptions
Home Office Expenses
If you work from home, you may claim a portion of your home expenses as a deduction. This can include:
- Rent or mortgage interest
- Council tax
- Utility bills
- Home Insurance
- Repairs and maintenance
You can either use a flat rate allowance or calculate your expenses based on the proportion of your home used for business.
Travel expenses incurred for business purposes can be claimed, such as:
- Mileage for business trips (using the approved mileage rates)
- Public transport fares
- Accommodation expenses for business trips
- Parking fees
You can claim the cost of professional fees related to your business or trade, including:
- Accountancy and bookkeeping services
- Legal fees for business matters
- Professional memberships and subscriptions
Other Allowable Deductions
Additional deductions that may be available include:
- Pension contributions (subject to limits)
- Charitable donations (eligible for Gift Aid)
- Capital allowances (for the purchase of business assets)
- Research and development costs (for qualifying businesses)
- Tax relief on 20% of your medical expenses and third-level tuition fees
Review your tax return for accuracy and completeness
Before submitting, carefully review your tax return to ensure all information is accurate and complete. This helps avoid potential penalties for providing incorrect information.
Submit your tax return
Follow the submission process for your chosen method:
Online submission: Log in to your HMRC online account, navigate to the self-assessment section, and submit your completed tax return.
Paper submission: Mail your completed paper form to the appropriate address provided by HMRC. Ensure you send it well before the deadline to account for potential postal delays.
Tax Calculation and Payment
Understanding your tax calculation
Your tax liability is calculated based on several factors:
- Income tax bands and rates: Different income tax rates apply depending on your total taxable income.
- National Insurance contributions: Self-employed individuals pay Class 2 and Class 4 National Insurance contributions based on their profits.
- Tax reliefs and allowances: Deduct any applicable tax reliefs or allowances from your taxable income.
Paying Your Tax Bill
When it’s time to pay your tax bill, you have several payment options available, including:
- Direct Debit: You can set up a Direct Debit through your online Government Gateway account to pay your tax bill automatically.
- Bank transfer: Pay via Faster Payments, Bacs, or CHAPS, using the HMRC bank account details provided on your tax bill.
- Debit or credit card: Pay online using a debit or credit card through the HMRC website.
- Cheque: Send a cheque payable to ‘HM Revenue and Customs only,’ along with your payment slip, to the address provided on your tax bill.
- At your bank or building society: Pay at your bank or building society branch using your payment slip if they offer this service.
The payment deadlines for self-assessment tax returns are:
- 31st January: Pay any outstanding tax due for the previous tax year and the first payment on account (if required) for the current tax year.
- 31st July: Pay the second payment on account (if required) for the current tax year.
It’s crucial to make your tax payments on time to avoid late payment penalties and interest charges.
Late Payment Penalties
If you fail to pay your tax bill by the deadline, you may face the following penalties:
- 1 day late: £100 fixed penalty
- Up to 3 months late: £10 per day, up to a maximum of £900
- 6 months late: An additional £300 or 5% of the tax due, whichever is higher
- 12 months late: A further £300 or 5% of the tax due, whichever is higher
In addition to penalties, HMRC charges interest on late payments from the due date until the payment is made.
By understanding how your tax is calculated and the payment options and deadlines, you can ensure compliance with tax regulations and avoid penalties. Proper tax planning and timely payments are essential for maintaining good financial health and staying in good standing with HMRC.
Paying your tax bill
Once you know the amount of tax you owe, make the necessary payments:
Payment methods: Choose from various options, such as Direct Debit, online or telephone banking, debit or credit card, or payment at a bank or building society.
Payment deadlines: Remember the deadlines for payments on account (31st January and 31st July) and the balancing payment (31st January following the end of the tax year).
Late payment penalties: Be aware that late payments may result in penalties, including interest charges and surcharges.
Common Mistakes to Avoid
Missing deadlines: Ensure you submit your tax return and make payments by the relevant deadlines to avoid penalties and possibly triggering an HMRC audit.
Inaccurate or incomplete information: Double-check your tax return for accuracy and completeness before submission.
Overlooking allowable expenses and deductions: Familiarise yourself with the various expenses and deductions you can claim to reduce your tax liability.
Not keeping accurate records: Maintain well-organised financial records to simplify the tax return process and provide evidence in case of an HMRC inquiry.
Amending a Submitted Tax Return
When and how to amend your tax return: If you discover a mistake on your submitted tax return, you can amend it within 12 months of the original submission deadline.
Deadlines for amendments: The deadline for amending your tax return is 31st January, one year after the original submission deadline.
Consequences of submitting incorrect information: If HMRC suspects you intentionally provided incorrect information, you may face penalties or a tax investigation.
Seeking Professional Help
Benefits of hiring a tax professional or accountant: A tax professional can help you accurately complete your tax return, minimise your tax liability, and ensure you meet all HMRC requirements.
How to find the right tax professional for your needs: Look for a professional with relevant experience, qualifications, and a good reputation. Consider factors such as fees, location, and communication style when making your decision.
Completing and filing a self-assessment tax return can be complex. You can ensure you meet your obligations with careful preparation and a thorough understanding of the steps involved. By staying organised and informed, you can make the process smoother and avoid common pitfalls. If you’re unsure about any aspect of the process, seeking professional help can provide valuable guidance and peace of mind.