A Guide to the Self-Assessment Tax Return Process
Completing a Self-Assessment Tax Return can be an overwhelming task – there are some complicated procedures involved, and it is hard to complete on your own. This has to be filled by anyone who is self-employed, included those who are contractors or owners of limited companies.
Self-Assessment is a system that is utilised by HM Revenue and Customs (HMRC) to collect Income Tax in the UK. While tax may be typically deducted automatically from wages, savings and pensions, individuals and business with other income types are obligated to report it in a tax return.
If you are domiciled in the UK and obliged to send a tax return, make sure that you know the process and are mindful of the deadlines. You should also maintain accurate records of employment-related documents as they will be needed for filing your tax return properly. The tax return is sent after the end of the tax year. After that, the HMRC calculates your payable tax based on what you have reported. This process involves online registration and utilization of HMRC online services.
To make things easier for you, here’s a step-by-step guide on how to complete your tax return online:
STEP 1: OPEN YOUR ONLINE ACCOUNT
Visit https://www.gov.uk/log-in-file-self-assessment-tax-return to set up your online account. Select your form according to the type of your employment. You will receive an activation code after your registration.
STEP 2: MAKE SURE THAT YOU HAVE YOUR DOCUMENTS READY
If are not self-employed, your documents will include bank statements and income details. For those who are self-employed, you will need your income records and receipts for expenses. Remember, you will need to get some of these documents from third-party organisations, so make sure that you have your documents ready before the deadline.
STEP 3: SORT OUT YOUR ALLOWANCES
For the year 2019-20, each individual has a Capital Gains tax-free allowance of £12,000 while the Personal Allowance has been increased to £12,500.
If you are a higher-rate taxpayer, you can claim higher-rate tax relief to be allowed on your pension contributions. For this purpose, you should quote your gross figure, that is the total amount added to the pension after the pension provider has received the basic-rate relief from HMRC. Remember, you don’t have to quote the net amount, which is the amount that you have paid yourself.
STEP 4: DON’T SKIP ANY INCOME
You have to declare any income on which you haven’t paid the tax. The taxable income types include:
- Interests from savings
- Dividends from investments
- Incomes from the state pension (which are paid gross, but are still taxable)
- Rental income
- Child benefit payments (if your income exceeds £50,000)
Tax-free sources of income include:
- Money held in Isas or Premium Bonds
- Lottery wins
- Money earned from occasional sales on eBay or Etsy
STEP 5: BENEFIT FROM TAX-DEDUCTIBLE EXPENSES
You should claim any deductions that may apply in your case. These tax-deductible expenses include:
- Gift aid on your charitable contributions
- Membership expenses for conservation charities, museums and zoos
- Membership expenses for professional bodies that are required for your employment
- Self-employed individuals can claim to get the costs of using a car (but not the buying cost)
- Landlords may claim back any expenses that are necessary for renting out their property, such as maintenance costs, advertising costs or agents’ fees.
STEP 4: SORT OUR YOUR NICs
For the year 2019-20, the Class 1 National Insurance threshold is £8,632 per year. If your income is below this, you will not pay National Insurance Contribution, and if your income is higher than the threshold, your contribution will be as follows:
Table source: https://www.which.co.uk/money/tax/national-insurance/national-insurance-rates-ajg9u9p48f2f
STEP 7: CHECK YOUR DETAILS THOROUGHLY
Before you press the ‘Submit’ button, ensure that all the details that you have entered are correct. If you are filing your tax return online, you can easily save your work and access it later in case you need to double-check your numbers.
Tip: To simplify the process, get professional help. A tax return accountant can assist any individual, contractor or company with the tax return filing by handling all the documents and fulfilment of the requirements on your behalf. When you put someone, who knows this process inside out take charge, you will save time and energy, prevent stress and will have mental peace knowing that there won’t be any mishaps.
For support with your Self assessment Contact Us on 020 3086 7472 for a no-obligation discussion with one of our tax accountants.