If you’re self-employed, whether you run a business or work as a freelancer, you’ll usually need to fill in a Self Assessment tax return each year.
The Self Assessment process can seem complicated at first, especially as the government often make changes to it, so we’ve broken down what you need to know for a stress-free Self Assessment when filing your tax return.
- Self Assessment and tax resource
- Making Tax Digital: guide to the new Self Assessment process for small businesses and the self-employed
- When is the Self Assessment deadline 2018?
- How to register as self-employed with HMRC
- A guide to Self Assessment tax returns for landlords
- What is business insurance?
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What tax do small businesses need to pay?
Depending on the particulars of your business, there may be a number of types of tax you need to pay. These are some of the most common:
For more information about the deadlines for other types of tax, check out our guide to business tax deadlines.
Am I responsible for my business’s tax payments?
According to HMRC, you are considered self-employed (and therefore responsible for filing a Self Assessment tax return) if:
- you have the final say in how the business is run
- you are responsible for meeting losses as well as profits
- you can hire someone on your own terms to work for you
- you decide what work to do, how you do it and where to provide the services
- you regularly work for other people
- you complete unsatisfactory work in your own time and at your own expense
There are different rules if you work through an agency, if you’re a company director or if you’re the secretary of a club or holder of another office, but most sole traders will be responsible for their business tax.
If you’re unsure about your employment status, check out the guide on gov.uk
How does the Self Assessment process work for small businesses?
Once you’ve determined whether or not you need to register for Self Assessment and file a tax return, the process is largely the same whether you’re a freelancer, contractor, sole trader or business owner.
Registering for Self Assessment
To register for Self Assessment, you need to visit the gov.uk registration page and submit your details. If your business is run as a limited company or a limited liability partnerhsip, the process is slightly different and you will need to register here.
Registering for Self Assessment should also give you a Government Gateway user ID, which you can then use to set up your personal tax account and manage different elements of your tax affairs online.
Once you’re registered for Self Assessment you’re then able to file your tax return. You do this by filling out the Self Assessment tax return form either online or on paper. However, the government’s Making Tax Digital initiative may mean small businesses can no longer file paper tax returns in future.
Tax return deadlines
At the moment, the deadline for submitting your tax return is October for paper tax returns and January for online tax returns. For the 2018-19 tax year, which ended in April 2019, the deadline for paper tax returns is 31 October 2019 and the deadline for online tax returns is 31 January 2020.
After submitting your tax return, you need to pay the tax you owe. The deadline is usually the same as the final date for online Self Assessment tax returns, so the deadline for paying your 2018-19 tax is 31 January 2020.
If you’re worried about being able to pay the tax you owe, have a look at our article on what to do if you can’t pay your Self Assessment tax bill. There are fines for late payment, so it’s a good idea to prepare for your tax bill as best you can.
Read more: when is the Self Assessment deadline?
How to fill in your Self Assessment tax return
When it comes to filling in your tax return, you’ll need all the information you have about your earnings for the tax year, as well as the details of any expenses you want to deduct from your tax return.
It’s important that you keep a record of all your income and expenses. That way, you’ll have it to hand when the time comes to fill in your tax return. There are a number of accounting apps and other bookkeeping software for small businesses, if you prefer to keep digital records, many of which integrate with the HMRC website to make filling in your tax return a bit easier.
In order to file your tax return, you’ll also need your UTR (unique taxpayer reference) number. This is a reference number that’s assigned to you when you register for Self Assessment. It’s usually printed on letters from HMRC regarding your tax return, but keep a note of it somewhere safe so you can easily find it when the time comes.
Read more: how to fill in your tax return
What are allowable expenses for small businesses?
When you’re self-employed, there are a number of costs you can claim back against your Self Assessment tax bill, so long as they’re allowable expenses. These are the main ones small businesses can claim:
- office costs such as stationery or phone bills
- travel costs such as fuel, parking, and train or bus fares
- clothing expenses such as uniforms
- staff costs such as salaries or subcontractor costs
- things you buy to sell on such as stock or raw materials
- financial costs such as insurance or bank charges
- costs of your business premises such as heating, lighting, and business rates
- advertising and marketing such as website costs
It’s important to note that if you work from home you can still claim business premises costs, but only a percentage. You can claim back for things like:
- Council Tax
- mortgage interest or rent
- internet and telephone use
HMRC asks that you find a ‘reasonable method’ of dividing the costs between personal and business use. They suggest using the number of rooms used for business purposes, or the time spent working from home.
If you run your limited company, you can instead deduct business costs from your profits before tax. If any of those are items you make personal use of, that has to be counted as a company benefit.
For more information on allowable expenses, check out our full guide to self-employed tax deductible expenses.
Changes to Self Assessment
In 2017, the government announced a number of changes to the Self Assessment process as part of its Making Tax Digital initiative, including quarterly tax returns and removing the option to file tax returns by paper. Some of these changes have been put on hold, although you can voluntarily sign up for the Making Tax Digital pilot for income tax instead of filing your Self Assessment. It’s worth keeping an eye out to see if the government makes any changes in the future.
As it stands, only businesses who pay VAT will have to submit their tax returns electronically, and only by 2019. However, the government have frequently said that they want to become ‘one of the most digitally advanced tax administrations in the world’, so it’s likely these changes will impact all small businesses in future.
Are you ready for your Self Assessment tax return? Let us know in the comments.
Looking for self-employed insurance?
With Simply Business you can build a single self employed insurance policy combining the covers that are relevant to you. Whether it’s public liability insurance, professional indemnity or whatever else you need, we’ll run you a quick quote online, and let you decide if we’re a good fit.