Self-Assessment (ITR) Time Is Here – Here’s What You Need to Know
Yes, I know, self-Assessment season is often associated with January. But did you know you can actually start filing your tax return from as early as 6 April? And you have until 31 January the following year to complete and submit it, a full 9 months to prepare!
Most people (including many accountants) tend to leave it until the last minute, which is why January gets the blame for all the stress. But imagine if you started now, you’d have months to organise your finances, set aside money for tax, and avoid the panic come January.
So, if you don’t want to be rushing at the last minute and want to make things easier, keep reading!
Get Ahead and Stay Calm
Starting early means:
- More time to gather details
- Less stress before the deadline
- More time to save for your tax bill
- Peace of mind knowing you’re on top of things
If you’re super organised and keep good records, you might already be ready to file from 6 April. If not, don’t worry, you can still start now!
First Things First: Get Your UTR
Your Unique Taxpayer Reference (UTR) is essential to complete your Self-Assessment. Not sure what this is or how to get one? Check out our blog – “Current Accountancy Ltd | UTR – What Now?“, for step-by-step guidance.
Once you have your UTR, you’re ready to start your return.
Starting Your Self-Assessment
Go to the HM Revenue & Customs (HMRC) website and fill in the online form. You’ll need to:
- Enter your personal details
- Add your UTR
- Include any income from employment (from your P60)
- Record tax and National Insurance contributions paid (also on your P60 or P45 if you’ve recently left a job)
If you don’t have a P60:
- Use your P45 if you left your job before 5 April
- Use your final payslip with year-to-date figures
If you had multiple jobs, be sure to include all of them.
What About Expenses?
There is one golden rule for expenses – always ask this question – is it wholly, solely and exclusively for business use? if the answer is yes then it can be claimed, if the answer is no then you likely cant claim it.
Some of the things that are often missed –
- Working from home allowance (for your employed job), since covid HMRC are much stricter on this so please check before claiming
- Travel costs, such as petrol for work trips (if not reimbursed by your employer), using the 45p per mile rate up to 10,000 miles. (This doesn’t include travel to and from your normal work place)
- Work-related clothes and equipment (these must be safety clothes or uniforms, you cant claim the suite you bought from M&S, unless you have a logo on it)
- Supplies like stationery, advertising, or office rent.
Other personal items can be split, for example, if you use your personal mobile for work 50% of the time, you can claim 50% of your phone bill.
Claiming Home Office and Vehicle Expenses
- Home Office: You can work out what percentage of your home is used for work (we have a handy calculator if you need it), or use HMRC’s simplified flat rate scheme.
- Vehicle: Keep track of your business miles and claim using the flat rate – 45p per mile for the first 10,000 miles, then 25p per mile afterwards.
The Trading Allowance
If your business has limited income and/or expenses, you might want to use the Trading Allowance:
- It lets you earn up to £1,000 without declaring it to HMRC.
- You can claim it if your expenses are below £1.000, so you can claim £1,000 even if your expenses were only £200.
- If you have significant expenses (over £1,000), it’s better to declare actual costs.
Still unsure? check out our E-book with all you need to know about business expenses.
Final Checks Before Submitting
Once all or your information is input:
- Review everything carefully
- Keep proof of your income and expenses (original invoices, receipts) for at least 7 years
- Submit your return online
You’ll then receive a confirmation receipt. HMRC will process your return and send you an estimate of the tax you owe.
How Much Will You Pay?
- If your taxable income (after expenses) exceeds £12,570, you’ll pay 20% tax on income up to £50,270.
- Income above that is taxed at 40%.
- National Insurance (Class 4), you will pay 6% on profits over £12,570, up to £50,270, then 2%.
- National insurance (Class 2) may not be covered so you may wish to make voluntary contributions, currently £3.45 per week, to ensure your pension stamp is covered.
If you owe more than £1,000 or haven’t paid enough tax throughout the year, HMRC will split your payments into instalments (January and July).
Beware, if you owe more than £1,000 HMRC will estimate the following years tax and add it to your current bill so always put a bit more aside in your first year!
What happens if I made a loss?
If you made a loss then there will be no tax to pay, and you can carry the loss forwards to the following year, reducing any tax liability in that period.
So for example, if you had income of £10,000 and expenses of £11,000, then you can carry the £1,000 loss forwards to the following year.
Final Words
Starting your Self-Assessment early isn’t just about avoiding stress, it’s about making sure you are putting aside the right amount of tax and keeping everything organised. If you need help with your return or aren’t sure about anything, just give us a shout!
Good luck, and happy filing!