How to complete self-assessment for self-employed?

For those who are self-employed, the annual self-assessment process is a crucial aspect of managing their financial affairs. Completing a self-assessment not only ensures compliance with tax regulations but also provides an opportunity to evaluate business performance and plan for the future. In this comprehensive guide, we will walk you through the key steps to successfully complete your self-assessment as a self-employed individual.

Understanding Self-Assessment:

Self-assessment is a process where individuals report their income and expenses to calculate the tax they owe or the refund they may be entitled to. For self-employed individuals, this involves reporting business income, allowable expenses, and other relevant financial information. The deadline for submitting a self-assessment is typically January 31st following the end of the tax year, which runs from April 6th to April 5th.

Gather Essential Information:

Before diving into the self-assessment form, gather all the necessary information. This includes records of your income, expenses, receipts, and any other relevant financial documentation. Keep accurate and organised records throughout the tax year to streamline this process and ensure you don't miss any deductions or credits.

Completing the Self-Assessment Form:

The self-assessment form, commonly known as the SA100, is available online through the HM Revenue & Customs (HMRC) website. The form is designed to capture various aspects of your financial situation, and it's important to complete it accurately to avoid potential penalties.

1.      Personal Information: Provide your personal details, including your name, address, National Insurance number, and Unique Taxpayer Reference (UTR). Ensure that all information is up-to-date and accurate.

2.      Income from Self-Employment: Declare your self-employment income, including profits from your business. Clearly detail the sources of income, and if applicable, report income from additional ventures or freelance work.

3.      Allowable Expenses: List all allowable business expenses incurred during the tax year. This may include office rent, utilities, office supplies, travel expenses, and any other costs directly related to your self-employed activities. Keep in mind that only legitimate business expenses can be claimed.

4.      Capital Allowances: If you have purchased equipment or assets for your business, you may be eligible for capital allowances. Provide details of these purchases, and the system will calculate the allowances you can claim.

5.      Taxable Income Calculation: The form will automatically calculate your taxable income based on the information provided. Review this section carefully to ensure accuracy and that all relevant income and deductions are considered.

6.      Tax Due and Payments: The form will display the tax due based on your income and expenses. Ensure that you have sufficient funds set aside to cover your tax liability. The payment deadline is January 31st, so plan accordingly.

7.      National Insurance Contributions: Report your National Insurance contributions, including both Class 2 and Class 4 contributions if applicable. This is crucial for maintaining your entitlement to state benefits, including the State Pension.

8.      Additional Information: If there are any additional details or circumstances that may affect your tax situation, provide them in the appropriate sections. This might include information about dividends, foreign income, or other sources of revenue.

Seek Professional Advice:

If you find the self-assessment process overwhelming or have complex financial situations, consider seeking professional advice. A qualified accountant can ensure that you maximise your allowable deductions, comply with tax regulations, and submit an accurate self-assessment.

Completing a self assessment for self employed individual requires careful attention to detail and organisation of financial records. By understanding the key sections of the self-assessment form and gathering the necessary information, you can navigate the process smoothly. Remember to submit your self-assessment by the deadline and consider seeking professional advice if needed. This proactive approach not only ensures compliance with tax regulations but also empowers you to make informed financial decisions for the future of your self-employed business.

The Value of Proactive Tax Accountants: Planning for the Future

Tax season may seem like a yearly event that comes and goes, but the role of tax accountants goes beyond preparing and filing tax returns. Proactive tax accountants bring immense value to individuals and businesses by helping them plan for the future and navigate the ever-changing tax landscape.

One of the key advantages of proactive tax accountants is their ability to assist with tax planning. Instead of simply reacting to tax obligations at year-end, these professionals work closely with their clients throughout the year to devise strategic tax strategies. They analyse financial data, identify opportunities for savings, and offer guidance on how to structure transactions and investments in a tax-efficient manner. By taking a proactive approach, tax accountants can help individuals and businesses optimise their tax liability and maximise their savings.

Furthermore, proactive tax accountants stay up to date with the latest tax laws and regulations. Tax codes are complex and subject to frequent changes, making it challenging for individuals and businesses to keep track of all the updates. A proactive tax accountant has the expertise and knowledge to navigate these intricacies. They interpret tax legislation, understand its impact on various financial decisions, and ensure their clients remain compliant while taking advantage of available tax incentives and deductions. By staying informed, tax accountants can provide timely advice and help their clients make informed financial choices.

Another valuable aspect of proactive tax accountants is their role in long-term financial planning. They go beyond immediate tax concerns and collaborate with clients to develop comprehensive financial strategies. These strategies may include retirement planning, estate planning, and investment analysis. By considering the broader financial picture, proactive tax accountants can align tax planning with overall financial goals, helping clients build wealth and secure their financial future.

Proactive tax accountants also provide peace of mind. Tax-related stress can be overwhelming, especially when facing complex tax issues or dealing with audits. Having a proactive tax accountant on your side means having a trusted advisor who can handle these situations with expertise and professionalism. They can represent clients during audits, ensure accurate documentation, and navigate any disputes or inquiries from tax authorities. This relieves the burden and anxiety associated with tax compliance, allowing individuals and businesses to focus on their core activities with confidence.

Additionally, proactive tax accountants bring a fresh perspective to financial decision-making. They bring insights and recommendations based on their extensive experience working with a wide range of clients. Their objective viewpoint can uncover opportunities or potential risks that clients may not have considered. This valuable input helps clients make well-informed decisions, optimize tax outcomes, and avoid costly mistakes.

Professional tax accountants offer substantial value beyond tax preparation and filing. Their expertise, ongoing support, and strategic guidance contribute to long-term financial success. By engaging a proactive tax accountant, individuals and businesses can benefit from effective tax planning, stay compliant with ever-changing tax laws, and develop comprehensive financial strategies. Moreover, they provide peace of mind, handle complex tax situations, and bring valuable insights to financial decision-making. Investing in a proactive tax accountant is an investment in a brighter financial future.

Things need to be taken care of when filing a self-employed tax return

 First and foremost, a business owner should know whether to register as self-employed or as a limited company. Both registrations are vastly different. Let's see how:

Register As Self-Employed	Register As A Limited Company
Disclosing requirement is less as you are only required to complete a Self Assessment tax return once a year. You can hire Self-assessment accountants in London for this	Disclosing requirements are much more
You are entitled to all the profits you	You are not entitled to all the profits You
You are a business and not the officer of the company.	In a Limited Company, you are the officer of the company
You have no restrictions on withdrawing funds from your bank account.	You being a director of the company would be withdrawing as a salary, bonuses, dividend or a loan account.

Pre-Requisition For Setting Up As A Sole Trader Or A Self Employed

Anyone can set up as a sole trader or self-employed but in a few business types, you require to obtain a permit or a license from your local authority. These businesses include a Taxi Driving license, Babysitting, and Selling anything on the street.  At the time of setting up as a Sole Trader one has to follow some legal requirements.

If you will be running your business from home, you need to pay business rates in the area that you are using for your business purpose. For Example – If you are selling bakery items in your store room area or in your garage, you need to pay business charges for that store room or garage.

If you are an IT person and working from your laptop sitting in your bedroom or sitting area, it is unlikely to pay business rates because it is also being used for a domestic purpose – but if the same thing is done making a separate room such as an office, then you will have to definitely pay business rates as this room is only used for your business purpose. You may also need planning permission to work from home, depending on what type of business are you in. Planning permission is required because if your business area is getting a side extension and the neighbours residing there have an issue then at that point in time it becomes necessary for you to take planning permission. Planning permission and the rates for it are different according to your type of business to know about it you need to contact your local authority as every area is different.

Who Registers as Self-Employed?

If you register as self-employed you are not required a lot of administration as compared to a limited company. However, if you are registering as self-employed then you must register by 5th October of the second tax year of your business from when you have started your self-employment or when you have started trading. You may receive a penalty of £100 if you do not register on time and the penalty will increase after three months.

Who Can Be Classified as Self-employed?

Contractors – They work on a contract basis, for example, Plumbers, Builders, Electricians (CIS Tax), Locum GPs and etc.

Freelancers – They work on client-based requirements so it can be on a weekly, monthly or quarterly basis. Once the work is completed you get some other client to work with.

You will receive a Tax-Free code from the “gov.uk”, which for this Tax Year of 2022/2023 will be 1257L. If your income is more than £100,000 then your personal allowance will be less.

Registering for Self-Assessment Tax Returns for Self-employed

Self-Assessment Tax Return is submitted to HMRC by a Self-Employed person or Sole Trader. For this, you need to fill up a tax return form (either online or hard copy). Note the deadlines for both online and offline are different.

If you belong to the threshold of 85,000, you need to inform HMRC about your sales and expenses in a simple three-line format. There can be a possibility to fill up the full self-assessment tax return if you fall under a certain category that needs full disclosure of expenses. For a new self-employed there are many more things that you need to know. You can get the information on the HMRC website

HMRC will send you the self-assessment tax return in the month of April every year but anyhow if it doesn’t reach you by the end of April, it is your responsibility to inform about this to HMRC or else you will be liable to pay the required penalties. For those who are doing it for the very first time, you will need to fill in a self-assessment registration form first. For this National Insurance Number is mandatory.

Self-employed Registration

The one who is a sole trader /self-employed they have to fill up a CWF1 form to inform HMRC about the type of your business.

The one who is not self-employed has to complete filling out an SA1 form. Once this is done, HMRC will set up Tax Records for you and HMRC will send you a UTR number that needs to be preserved lifelong.

For all this, you can hire an accountant for self-employed in London who will register on your behalf and will get you the UTR number.

Self-employed Self-Assessment Payment Deadlines

You must pay the total amount you owe to HMRC by 31st January. The deadline for payment is the same for both filed online or offline (on paper). You will have to pay both or any one of the following:

• The balancing payment

• The first two ‘payments on account’

 

You will receive a statement after filing from HMRC stating the amount due for your return. If you do not receive this before your due date of payment, then you have to do it yourself or this can be done by the accountant you have hired.

Self-employed Filing

If you are a Sole Trader, it is mandatory for you to file tax returns annually. If you are a VAT Registered business as self-employed, then your VAT returns should be completed every quarterly or Annually.

This means you will have to not only stay compliant but also be organized every time to help you make the process quick and efficient. When the new Digital Tax Scheme comes into place in the near future all Self Employed Individuals will have to file tax return quarterly in the near future as the new digital tax scheme is going to be the future

While filing a self-employed tax return you need to be accurate in the legal formalities. If you miss any small thing, you will be liable for penalties. So to be on the safer side you must take the help of an accountant for self-employed in London who will register if this is your first time, will file your tax quarterly and will not get you the penalties.