We know that completing your first tax return can be a daunting process. If you’re not experienced with keeping accounts, it’s understandable to be worried about making mistakes. At Mazuma we have your back – check out the five point list we’ve put together to help you feel confident going into next year’s self-assessment tax return.
Not getting yourself registered
In order to successfully complete your tax return you need to first register for the Self Assessment service. You can do this via the HMRC website or you can fill in the form on your computer, print and post it to HMRC. After you register you will be sent a unique taxpayer reference (UTR) number which you’ll need to submit your first, and all subsequent tax returns – so make sure you keep a note of it!
Not claiming all your expenses
Many people forget to claim a bunch of expenses and end up paying hundreds of pounds in tax that they don’t need to. No one wants to pay more tax than they have to! You can claim for a whole host of business related expenses such as travel costs, stationery, advertising and training. If you’re not sure what you can claim as an allowable business expense take a look at the handy HMRC page all about self-employed expenses. Be sure to keep all receipts and bills relevant to the expenses that you claim as these records could be requested by HMRC up to 5 years later (6 years for limited companies). The total amount of expenses incurred are then subtracted from your income to give your final profit – the amount that is liable for taxation.
Not including salary and benefits from another job
Are you a superhuman who works multiple jobs? Well, if you have another job in addition to running your own business, you need to include this in the employment pages on your tax return. First, grab your P60 form – this will show you the total income earned in that tax year as well as how much tax you paid on it. If your employer also provides you with other benefits such as paying for expenses you will also need to grab your P11D form. As if that wasn’t enough forms already you may also need your P45 on hand when doing your tax return if you’ve changed jobs in the tax year in question.
Not including interest from your bank account
As well as income and expenses from your business, your tax return also needs to include details of interest received on all of your bank accounts. This includes interest received on business bank accounts, joint bank accounts and personal bank and building society accounts. Exceptions to this are accounts like ISAs where the interest is paid tax-free.
Not preparing for payments on account
So you’ve done calculations, budgeted for the tax you will owe and are ready to pay, great! But have you budgeted for the payments on account too? Payments on account are an extra tax payment you make towards the following year’s tax return and they are due on 31st January alongside your regular tax bill. The amount you will be charged for your payment on account is 50% of the tax that would have expected to be due for the year which means that in your first year you will effectively pay a 150% tax bill. That sounds pretty scary, and if you haven’t budgeted for it it could be a bit of a shock! You will then have a further payment on account (another 50%) due on July 31st. The upside is that the following January you will simply have to either settle any extra tax due (if your earnings increased) or you will receive a refund (if your earnings decreased).