To kick off the new year (and self assessment deadline month.. eek!), I'm pleased to share wise words from financial expert Anita Brook in this guest post to inform and motivate small business owners. Anita is a Director of the leading small business accountancy firm Reid & Co based in Milton Keynes, working with individuals and businesses all over the UK.
Prior to this she ran her own small accounting firm, launched while caring for her young daughter Isabella. "As a result I know all too well the amount of stress that can be experienced with the self-assessment deadline imminent, trust me having a young child increased this tenfold!"
Here are Anita's tips for Digibloom readers:
We all know that January is an incredibly stressful time for sole traders and small businesses, with the self-assessment deadline looming closer, and more important things to do than be online until the early hours completing your paperwork – so how can you make it as stress free as possible?
HMRC require self-assessments to be completed no later than midnight on the 31st January 2017. This is always an incredibly busy time for us as accountants and we understand how stressful it can be for small businesses.
Here are my top insights into how you can conquer your self-assessment this year, without losing any hair:
1. Register in advance
By the time you read this it’s already too late to complete the self-assessment on paper meaning you have no option but to do so online. You can’t actually submit your tax return online without being registered with HMRC first. If you haven’t already gone through this process, you need to do so ASAP!
It can take a few weeks for your activation PIN to arrive through the post, and HMRC won’t give you the information over the phone, which means that if you leave it too late to contact them, you probably won’t receive the information in time. As a result you’ll likely miss the deadline and automatically be fined £100.
2. Understand the financial year and deadlines
The last tax year started on 6 April 2015 and ended on 5 April 2016. The annual self-assessment means that any income earned during that period should be included in your end of year figures. If you sent out your invoice in the current tax year but didn’t get paid until after the deadline, you should still include it.
3. Find your UTR
You can’t submit your return without something called a UTR (Unique Taxpayer Reference), which is a 10-digit reference, found on any paperwork from HMRC. If you don’t know your UTR, you’ll have to contact HMRC’s Self-Assessment Helpline and ask them to post it to you.
4. Collate all your information
To file an accurate return, you need to have all the necessary information in front of you to enter either manually or online. This ‘generally’ speaking should include things such as:
- If you are employed, receiving wages (this includes if you’re a director of your own limited company), your employer should have given you a form P60 showing your salary and tax for the year to 5th April 2015. You’ll need that form to include with your tax return and if your employer gave you a form P11D showing any expenses or benefits received.
- If your bank pays interest, you will also need to how much interest you received in the tax year and any tax deductions. However, don’t include interest on any ISAs and personal allowances.
- If you’re in business as a sole trader or partner, you’ll also need to know your business’s income and costs for the tax year. If you haven’t started sorting through the receipts for these costs you’ve collected, you must start doing this now.
- If you’ve received dividends on shares you own, whether these are in your own company or another, you’ll also need to include this dividend income on your tax return and demonstrate where it came from.
- Finally, if you earn more than £50,000, and you or your partner receives Child Benefit, then these payments also have to be shown on your tax return.
5. Follow the rules – to the letter
There are so many rules and regulations when it comes to HMRC and tax, it can be incredibly confusing. However, you must ensure you follow these to the letter, particularly when completing your tax return. One of the biggest errors I see is when people add up their income/ expenses.
Bear in mind, if you sent out your invoice in the current tax year but didn’t get paid until after the deadline, you still need to include it.
Another issue we see is ‘expenses’ that you can and can’t claim, especially when it comes to travel, accommodation, food & drink, entertaining, clothing and the business use of your home etc.
One thing you can do is check items such as this via the expenses list on HMRC’s website.
6. Check, check and check again
The form needs to be submitted (not just completed/ started) by midnight on the 31st January, so clicking ‘submit’ is as vitally as important as the information in it. You can complete the form online, via the HMRC website, or alternatively you can complete within specialist software, such as FreeAgent (for sole-traders) or open software, such as TaxCalc which aids the completion before taking you back to the HMRC website to file.
7. Pay on time
This may sound pretty obvious, but you’d be surprised how much we see this happen. Don’t forget to actually pay your calculated tax return amount which also needs to be settled by the 31st January!
8. Bring in a professional
If you’re still unsure – hire an accountant. We are accustomed to reading what can be jargon to small businesses, because we deal with it every day. You may find in the end it’s also more cost productive because of the amount of time you spend trying to decipher all the information into the form!
Connect with Anita via the following links:
HMRC have useful live webinars and videos to help you understand the self assessment process.
What do you struggle with most when it comes to filing your self assessment? Let us know in the comments!