Here’s a little secret – it doesn’t have to be that way! Now, we know what you’re thinking. You think that our only solution is hiring a bookkeeper to do your self assessment for you. Well, of course we would recommend having someone with experience on hand to help with the important bits of your business, but there is a lot that we can share with you if you’re not quite there yet.
Where oh where should we start in April? Naturally, we need to talk about Self Assessment tax returns.
What is a self assessment tax return?
If you’re new to business, you might not know! So it’s basically the way HMRC collects income tax for those who have their own business. Up to this point, your tax payment has probably been deducted automatically by your employer through wages and/or pensions. But, when you’re self-employed, you need to declare this yourself.
Can I get it wrong?
Sorry to be the bearer of bad news but yes, you can DEFINITELY get it wrong. We don’t want that to happen to anyone, so here are some of the most common mistakes people make with their self assessment.
- Lost your credentials – when you first sign up to file your self assessment, you are given a Government Gateway user ID. You need to keep this safe because it’s something you will use ALL the time when logging in to HMRC’s website. If you have misplaced them, you can have them reset or you may need to set up a whole new set of credentials
- Forgetting your tax-free allowances – setting up a new business can be a slow burn. If you’re married, you could consider transferring your unused personal allowance to your partner using the marriage allowance. There’s also the rent a room scheme, an allowance which allows you to earn up to £7500 tax free per year if you let out a furnished room within your home
- Failing to plan for your “payments on account” – This is an advanced payment that HMRC asks you to make towards your next tax bill. This includes any Class 4 National Insurance contributions if you’re self-employed. After filing your return, you’ll have to make two payments on account – one in January (31st) and the other in July (31st). Remember! The more you earn, the more you’ll pay, so make sure you put a bit aside each month to pay for it
- Missing the filing and payment deadlines – You know when they’re coming (or you will if you’ve read point 3!) If you fail to meet the deadlines, there is a penalty. They can range from £100 all the way up to the price of your tax bill. If you file early, you’re less likely to forget your payments and have plenty of time to squirrel the money away
- Don’t forget your charitable donations! We all like to do our bit to help a good cause, but did you know that this can also reduce your tax bill? Make sure you include this in your self assessment and top up those donations by adding Gift Aid too, if eligible.
These are just 5 of the most common errors made on self assessments every year, but there are plenty more where they came from.
That’s why we recommend asking a professional and most importantly qualified bookkeeper or accountant to look through your self assessment BEFORE you submit it to HMRC. This doesn’t need to be on a monthly retainer, but it could save you a lot of time and hassle. If you’d like to find out how we can help you, get in touch! Remember, don’t get caught out! It’s ok to ask for help!