If you are a business owner or are self-employed, then you will be amongst one of the 12.2 million people who are required to file self-assessment tax returns in the UK. The government requires taxes from businesses to fund development projects, improve security and support public services and, if you make an income or have capital gains, then you will be required to pay income tax.
Taxes are usually deducted from savings, salaries, and pensions, but if you are self-employed or earn an additional income that isn’t taxed automatically, then you are required to complete a self-assessment tax return and pay this directly to HMRC. Completing and preparing for tax return deadlines can be a complex and time-consuming task, but it is required. Let’s take a look at the 5 top tips for preparing for the tax return deadline and how you can make the process easier for yourself.
Get Your Online Account Sorted
In order to file your self-assessment tax return, you will need to get your unique taxpayer reference (UTR) number. It’s important to note that you will only need to apply for a UTR number once, but one of the biggest mistakes that a lot of business owners make when filing their self-assessment tax return for the first time is that they apply for this number too late.
You need to submit your application at least a month in advance, prior to the deadline. This is because, when you submit your application, it can take up to 10 days for the number to arrive through the post. You will then need to activate it and then it can take a further 10 days for you to receive the activation code.
Prepare By Gathering Relevant Information and Paperwork
The process of filing your self-assessment tax return is very heavy in terms of the paperwork you need to gather and provide. In order to make the process easier for you, both now and in the future, you should look to file appropriate documentation. This means that you can avoid misplacing them, as well as save the last-minute hassle of looking for the paperwork.
Some key documents you will need to provide include:
- Annual pension statements
- Documents indicating business expenses, such as receipts and invoices
- Information of any interest earned on savings and accounts
- Details of any Gift Aid payments
- P45, P60 and P11D if applicable
- Dividends earned from investments or other income sources
Remember To Claim Working From Home Tax Relief If Applicable
If you are still working from home, then you can still claim £6 per week (around £312 for the year) without having the justify the figure. This doesn’t matter if you only worked part of the week at home, but this tax relief can only be claimed if you or your employer did not reimburse you for any expenses. When completing a self-assessment tax return, then you can claim the £312 yearly amount as an expense on the “Employment” page of the form.
Ensure That You Are Claiming Appropriate Tax Relief
In order for a business to succeed, cost management is essential. When you are preparing to file your self-assessment tax return, you need to be certain as to which tax return you qualify for. You may be eligible for exemptions in certain circumstances that can help reduce your tax bill.
Tax relief comes in two forms:
- Your business receives tax relief for contributions you pay into other areas of your business, such as your pension.
- You can pay reduced taxes in order to account for things such as business expenses if you are self-employed.
Although some tax reliefs are automatically applied to your business, you will need to apply for others. Some reliefs and allowances you can get include things such as:
- Dividend allowance
- Personal allowance
- Marriage allowance
- Pension tax relief
- Trading income allowance
- Starting rate band
- Savings rate band
- If you are using venture capital schemes, then you could be eligible for investor tax relief
There are other ways in which you can claim tax back through legitimate business expenses, but you may not realize until it is too late to meet the deadline, however, you can make a note of this for the next tax year. Business outgoings, such as life insurance premiums, pension contributions, and income protection, can all be claimed back as a business expense, reducing your tax payments.
Understand The Deadlines, Penalties, and Fines
In order to avoid fines and penalties issued by HMRC, then it is important that you pay your tax bill on time. There is a different deadline each year for tax returns, so be sure to look well in advance so that you can meet this deadline. Paper returns often have a shorter deadline, so if you are planning to submit your tax return via a paper return, be sure to make yourself aware of this deadline.
You should make sure that you have enough time to complete and submit self-assessment tax returns in order to avoid late filing penalties. If your tax return is up to three months late, then you will be given a £100 penalty, but if it is later than this you will have to pay more. HMRC also applies interest to late payments.
For Further Financial Expertise and Advice
It is, of course, possible to file your self-assessment tax return independently. It can, however, cause a large amount of stress and this often results in late payment penalties and you might not always be aware of all available tax relief. Investing in a financial advisor, from an accountant to a business life insurance broker, can help you with tasks such as:
- Preparation and filing of accounts
- Tax planning and application
- Preparing your yearly tax return
- Putting VAT returns together
- Setting up payroll and pension payments
- Cash flow management
- Helping to raise capital
By following this advice, you should be able to find completing your self-assessment tax return much easier so that you can do what it is you do best – running your business.