How to Tackle Self-Assessment: A Step-by-Step Guide for Creatives

 

The UK’s creative sector, which include fields such as film, fashion, performing arts, and publishing, relies heavily on project-based work. Because of this, the industry's rate of self-employment is far greater than the overall economy's. According to government data, 16% of UK workers are self-employed, however 32% of workers in the creative business are.

For creatives, navigating the world of self-assessment can seem as daunting as mastering a new art form. Whether you’re a freelancer, artist, or consultant, understanding how to manage your taxes is crucial for maintaining financial health and staying compliant. Here’s a step-by-step guide to help you tackle self-assessment with confidence and ease.

1. Understand What Self-Assessment Is

Self-assessment is the system HM Revenue & Customs (HMRC) uses to collect Income Tax. If you’re self-employed or have other sources of income not taxed at source, you’ll need to file a self-assessment tax return each year. The purpose is to declare your income, claim any eligible expenses, and claim any relevant expenses.

2. Register for Self-Assessment

Before you can submit a tax return, you must register with HMRC. If you're newly self-employed or haven't filed a return before, you need to register by October 5th of your business's second tax year. For example, if you started trading in July 2023, you’d need to register by October 5, 2024. You can register online through the HMRC website or by phone.

3. Gather Your Financial Records

Organize all relevant financial records, including:

• Income: Invoices, contracts, and records of payments received.
• Expenses: Receipts and documentation for business-related expenses, such as art supplies, software subscriptions, or studio rent.
• Bank Statements: Bank statements that reflect your income and expenses.

Keeping accurate and detailed records throughout the year simplifies the process. Consider using accounting software to track your finances and generate reports.

4. Understand What You Can Claim as Expenses

As a creative, you can claim various expenses to reduce your taxable income. Common expenses include:

• Art Supplies and Equipment: Paints, canvases, or software necessary for your work.
• Studio Costs: Rent, utilities, and maintenance for your workspace.
• Professional Fees: Memberships to professional bodies or training courses.
• Travel Expenses: Costs incurred while traveling for work, including mileage, accommodation, and meals.

Make sure to differentiate between personal and business expenses; only business-related costs are deductible.

5. Complete Your Tax Return

You can complete your tax return online through the HMRC Self-Assessment portal or by filling out a paper form. The online system is generally more efficient, offering guidance and calculations as you go.

• Personal Details: Enter your personal information and National Insurance number.
• Income: Report all sources of income, including freelance work, commissions, and any other earnings.
• Expenses: Input your business expenses to calculate your taxable profit.

Ensure that all information is accurate and complete. Mistakes can lead to delays or penalties.

6. Review and Submit

Before submitting, double-check all entries to ensure accuracy. Review your calculations and verify that all income and expenses are correctly reported. Once satisfied, submit your return electronically or mail it if using a paper form. Keep a copy of your return and any supporting documents for your records.

7. Pay Your Tax Bill

After submitting your return, HMRC will send you a tax calculation showing how much you owe. The payment deadline is usually January 31st following the end of the tax year. For example, for the 2023/24 tax year, the deadline is January 31, 2025.

If you have difficulty paying the full amount, contact HMRC as soon as possible to discuss payment options or set up a payment plan.

8. Seek Professional Advice

If you’re unsure about any aspect of self-assessment, consider consulting an accountant or tax advisor. They can provide personalized advice, help with complex situations, and ensure that you’re compliant with tax regulations.

Handling self-assessment doesn’t have to be overwhelming. By understanding the process, keeping thorough records, and seeking advice when needed, you can manage your tax obligations effectively. With these steps, you’ll be better equipped to focus on your creative work while ensuring your financial and tax affairs are in order.

HMRC Tax Investigation - What You Need To Know?

 HMRC Investigations team start Code Of Practice 9 investigations if they doubt a “serious” tax fraud has been executed by planned activity. COP9 is a civil investigative process used by HMRC where severe tax fraud is doubted whereas they don't want to carry out a criminal investigation. Taxpayers are allowed to make a full discourse beneath a contract named a (CDF) Contractual Disclosure Facility about exemption from illegal prosecution. 

HMRC strongly suggest that you seek to appoint independent proficient advice. Our team of Tax Investigation experts assist you on all matters covered by the COP9. It is crucial that once under revenue investigation Specialist Tax Attorneys are instructed as COP9s can be badly handled by non-specialist accountants.  Our team have wide-ranging knowledge in helping those facing a COP9 investigation whilst assisting to navigate the tough time limitations and strict rules. 

We can assist you by:

• Reviewing the whole matter; 
• Providing specialist guidance throughout the whole investigative process;
• Depicting you in correspondence, consultations and sessions with HMRC;
• Arranging the range of the Disclosure Report; 
• Collating and scheduling all documentation instructed by HMRC, including Outline Disclosure, Full Disclosure and the Disclosure Report; and
• Examining disputed tax assessments and penalties.
  
  

Just call us at 020-8239-4999 for further assistance.

What is a Code of Practice 9 (COP9) investigation?

HMRC will start a COP9 investigation if they have proof that you have or may have executed serious tax fraud. There are 2 options for a taxpayer under a COP9 investigation:

1. Accept the Contractual Disclosure Facility (CDF): in return for immunity from criminal prosecution, a taxpayer is allowed to make an outline disclosure to HMRC setting out all the areas where tax fraud has been carried about in planned manners at the outset. Penalties and interest apply. This offer expires after 60 days. The CDF can also be used when you expect to reveal a tax fraud willingly.
   
   
2. Reject the Contractual Disclosure Facility (CDF): if you do not think that you have carried a loss of tax via intentional manners you can replace a CDF Rejection Letter within 60 days. If HMRC carries on with the investigation and discovers that you have executed fraud, you will receive more increased fines and you could receive a jail verdict.
   
   

NB: the Denial path for taxpayers has been revoked: formerly, a taxpayer could refuse fraud, though would cooperate with HMRC during the investigation. Discarding the Rejection choice conveys if you are subject to a COP9, you have 2 options: accept the CDF or reject the CDF. 

What is serious tax fraud?

In the context of COP9 investigations, fraud is described as “unethical conduct that directed to, or was intended to lead to, the loss of tax”. An individual commits an offence if they are deliberately involved in the fraudulent evasion of tax or duty, by themselves or by another person. 

This includes:

    withholding or hiding relevant truths;

    dying to reveal a tax or burden penalty; or

    faking your tax matters.

It is unrelated to whether you have earned from “deliberate conduct”. Plotted behaviour is described as a taxpayer comprehending that an entry in a tax return was faulty, but they submitted it anyway. Tax fraud cannot be executed accidentally and the CDF is not fair to those desiring to reveal just sloppy mistakes or errors.

Code of Practice 9 contains taxation losses carried via Missing Trader Intra-Community (MTIC) fake and the loss of excise duties through your deliberate behaviour.

What is HMRC Contractual Disclosure Facility?

HMRC will mail an opening letter informing you of their suspicion of tax fraud. This letter will contain a copy of COP9 & the offer of a contract via the CDF. It is crucial to consult Specialist Tax Solicitors as soon as you obtain this communication from HMRC because it is important to respond within 60-as soon as the letter is received. If you don't reply at this time, HMRC will cancel their CDF offer.

What is the result of joining a CDF?

By concatenating the CDF you will confess that tax has stood withheld from HMRC due to your deliberate behaviour. As such, HMRC will be authorised to recover tax, penalties and interest that you bypassed from twenty years to the present.

A CDF signifies that you will be needed to co-operate with HMRC (with the help of Specialist Tax Lawyers), which assures the most amazing likely reductions on any penalties due.

What happens if the Contractual Disclosure Facility is rejected?

HMRC will start its investigations if you sign the CDF Rejection Letter. A Rejection Letter can be used in tribunal or Tax Tribunal proceedings, hence legal advice should be taken before communicating with HMRC.

It is important to consult a Tax Investigation Specialist because even if you plan to accept the CDF, if the Outline Disclosure is wrongly filled in then HMRC will not be bound to follow their side of the contract.