More and more people nowadays are taking the plunge and going into business for themselves. Of course, when you become self-employed you also take on the obligation to file a tax return.
You need a return for each tax year and this must be completed and submitted by a set date. It’s important to keep good records of income earned as well as expenses incurred running your business for the purposes of tax relief.
For the period 2021/2022, your online self assessment tax return needs to be completed and given to HMRC by midnight on 31st January 2023. You must also pay any tax and national insurance owed at the same time if you want to avoid any penalties. If you are submitting a paper form for the tax year, this needs to be with HMRC by 31st October and payment made by 31st January.
In general, it’s easier to complete your self assessment tax return online using the HMRC portal. It’s relatively easy to use and, especially for simple tax returns, and should take about 30 minutes to complete. Once you have input your details, the system will calculate the income tax and national insurance you need to pay.
Here we look at the basic principles of self-assessment and how to submit your tax return.
Important tax deadlines for 2022, you should know
If you have not already done so, you will need to register as self-employed with HMRC through their online portal so that you can submit your self assessment. This must be done by 5th October in your second financial year of trading.
Unlike PAYE employees, the self employed and sole traders who have to complete their own tax returns, pay for the previous tax year. For example, if you submit your tax return for 2021/2022, you will pay your income tax bill for that period by the end of 2023.
You can only submit your tax return when the financial year has finished – in this case, 5th April 2022. You have until midnight on 31st January 2023 to submit a self assessment online and failure to do so can lead to a fine. You also need to make payment for the previous year’s tax bill by this date.
Note: If you have a set or regular income that you can easily judge, you can choose to make two payments, one by 31st July and the other by 31st January.
If you submit paper tax returns then the timing is different. You need to complete and send your self assessment tax return to HMRC so that it reaches them by 31st October.
What are the fines for late tax returns?
While HMRC has been more lenient during the pandemic with late tax returns, things are pretty much back to normal now.
If you miss the self assessment submission deadline, you can get a £100 fine from HMRC. If you are more than 3 months late you could also be charged £10 a day up to the maximum of £900.
You can also be fined for late payments. This is usually a percentage of the tax return. Currently, this is 5% of the tax unpaid after 30 days. If you fail to make a full payment you can be charged another 5% for the tax unpaid after 6 months and a further 5% for the tax unpaid after 12 months.
How to submit your 2021-2022 tax return
When you register for a self assessment tax return with HMRC, you will be given an online log in and a unique taxpayer reference with access to your individual government gateway account.
You will need some information to hand. If you have only worked as a self-employed person in the past financial year, then you will simply require your turnover details and any expenses relating to your self employment along with some personal information.
If you work for a company and also run a small business that requires a self assessment tax return, HMRC will need to take into account your earnings in your other job. You will need a P60 detailing your earnings and tax paid.
You will also require any other financial paperwork and details relating to your self assessment tax return, for example, savings and investments income that you might have earned as a director of a company.
To submit your return, you will need to sign into the HMRC self assessment portal and click on the starting link to begin inputting information. If this is your first time, the opening page will cover your personal details such as name and address and national insurance number and a few details about your business.
Your government gateway account is fairly intuitive and if certain sections do not apply to you once you have completed the personal information, you shouldn’t see it coming up.
The most important part is detailing your business turnover for the year and your expenses. There are additional sections that cover other income, investment income and property income.
You can claim various expenses in connection with your business. If you work from home, self assessment tax returns give the option of using a flat rate rather than trying to work out the usage for things such as gas and electricity. This can be a lot easier and gives you an expense of, for example, £28 per month if you work from home for more than 101 hours.
Once you complete a tax return, it’s important to check that all the details are correct before you sign the self assessment. Once you click on the submit a self assessment button online, there is no going back and the system will calculate your tax bill and the amount of national insurance you need to pay.
Most people submit their tax returns using the self-assessment portal. This is all part of the government’s Making Tax Digital initiative which is designed to make submission easier. It’s also meant to encourage the use of digital accounting platforms that track invoices and financial transactions for the tax year.
You can find out more about Making Tax Digital here.
Paper tax return
Some businesses still complete their self assessment using a paper form, SA100 which can be downloaded from the HMRC website. This takes the same structure as the self assessment tax return online.
If you are completing a paper self assessment tax form, it needs to reach HMRC by 31st October at the latest.
What is the earliest you can file your taxes 2022?
The earliest you can file a tax return for 2022 is the end of the financial year, in this case 5th April 2022.
What documents do I need to file my taxes?
If this is your first time, you will need your 10 digit UTR or unique taxpayer reference, your national insurance number and the financial details for your self assessment such as the income earned and details of expenses that you can use to off set your final bill and get tax relief.
Anyone who works for themselves needs to pay income tax on what they earn and that means completing a tax return. The easiest option for self assessment is to do your tax return online which will calculate your tax bill for you. This needs to be completed by the end of January 2023 following the completion of the previous tax year on 5th April 2022.
If you need help with your tax return for 2022, our professional team is on hand to give advice and support. Contact VW Taxation today to find out more.