It’s that time again. The annual Self Assessment deadline is creeping up, ready to spring a nasty surprise on self-employed people and company directors across the UK.
Many people put their Self Assessment tax return off until the very last minute simply because they are confused about what they need to do. In reality, though, the Self Assessment process need not be too complicated. Here are some tips to help take the sting out of the tax return tail.
1. Get some good bookkeeping software
Good bookkeeping and accountancy software is a necessity if you are to make your Self Assessment as easy as possible. Extraordinarily, many self-employed people continue to do their books on paper. But a good bookkeeping package can significantly reduce the time it takes to complete your Self Assessment. If you have kept good records throughout the year in your bookkeeping package, filling in the form can be as simple as pressing a few buttons. Even better, this software need not be expensive. For more information, check out our round-up of the best online bookkeeping software.
2. Keep accurate records
You are legally required to keep full and accurate records throughout the year. In addition to this legal obligation, though, these records are vital when it comes to completing your Self Assessment. If you have all of your receipts and invoices to hand (and even better, if these are already entered into your bookkeeping software) you will be able to complete much of the process very quickly.
3. Understand the deadlines
The range of Self Assessment deadlines can be confusing. The system changed in 2008, and many newly self-employed people may this year be completing their first Self Assessment since the change. If you file online, you must ensure that this is done by midnight on 31 January. On the other hand, if you continue to file on paper, you must make sure that your return reaches HMRC by 31 October. You should also remember that you will have to make your balancing payment on 31 January – so it is well worth getting your Self Assessment in before this date in order to give yourself time to get the cash together.
4. Register for online services
HMRC is trying to encourage people to file online as much as possible. Indeed, by this point you have already missed the deadline for paper filing. If you are intending to file online, though, you should remember that you must register for the online service in advance. Each year many people leave this until the last minute, only to find that it takes around five days for activation codes to arrive. You should therefore make sure that you register for online access well in advance. You can do this through the HMRC website.
5. Hold onto your paperwork
As well as keeping your receipts and invoices throughout the year, you are also legally obliged to keep any paperwork relating to your Self Assessment for a certain period after you complete your return. You must keep all the information you used to complete your Self Assessment for at least 22 months following the end of the tax year to which it relates. If you are letting out property or operating a business, you must keep those records for five years and 10 months from that date.
6. Filing on paper? Check before you send
If your tax return is incomplete or incorrect, it will be returned. The online filing system prevents you from omitting information; it will not let you submit the document until it is complete. But no such safeguards exist if you are submitting on paper. It is therefore vital that you check, check and check again before sending your return. It is also worth remembering that significant errors on your tax return could leave you open to an investigation by HMRC.
7. Understand the payment on account
Finally, it is important to understand the range of payments that you will be required to make as a Self Assessment taxpayer. In addition to your balancing payment, on 31 January you will also probably have to make your first payment on account. This will be equivalent to 50 per cent of your tax bill, and is intended to minimise the shock of next year’s tax bill. You should make sure that you take this into account when budgeting.
As the slogan goes, tax need not be taxing. With a bit of preparation and a good understanding of your responsibilities, you can make the Self Assessment process as simple and hassle-free as possible.