Self assessment tax returns: how to guide [2021 update]
Completing a Self Assessment tax return can be a daunting prospect. That’s why we’ve put together the ultimate guide to completing your Self Assessment.
Here’s the outline of what we’ll cover in this guide:
- Registering with HMRC for Self Assessment. The first step to is to make sure you need to submit a return, and then registering with HMRC to do so. Need to know what a UTR is, and how to get one? This is the section for you.
- Keeping your records. The key to submitting an on-time and accurate Self Assessment is keeping proper financial records. In this section we’ll explain how and why you should record your income in certain ways, to ease your tax burden further down the line
- When should I complete my Self Assessment?: Timing is key – should you wait until the evening before the deadline to file your tax return? Here we explain why the early Self Assessor catches the financial benefit.
- Completing your Self Assessment. With all your preparation behind you, here we explain the best way to actually complete the dreaded forms.
- What will happen if I file my Self Assessment late? If the worst should happen and you are late submitting your tax return, what will your punishment be?
Something you’re not sure about or we didn’t cover in our self assessment guide? Leave a comment and we’ll do their best to help you out.
- 1 Do you need to complete a Self Assessment tax return?
- 2 How to register for self assessment
- 3 When do you have to register for Self Assessment?
- 4 What will you get when you register for Self Assessment?
- 5 Do you have to register for Self Assessment every year?
- 6 How to keep freelance accounting records
- 7 If in doubt, speak to a specialist
- 8 When should you complete your Self Assessment tax return?
- 9 When is the earliest you can submit your Self Assessment?
- 10 Why would you file your Self Assessment early?
- 11 How to complete the Self Assessment tax return form (SA1)
- 12 How to fill in the SA1 form
- 13 What happens if you miss the Self Assessment deadline?
Do you need to complete a Self Assessment tax return?
If you are a freelancer, yes.
As a general rule Self Assessments are for anyone who receives income that is not taxed “at source”.
In the case of a sole trader, the income you receive does not have National Insurance contributions or Income Tax subtracted from it.
You must tell HMRC about that income on your Self Assessment so they can calculate what, if any, tax you owe.
Other examples of income not taxed “at source” includes rental income from any property you may own, or income from abroad.
If you are the Director of a limited company you must complete a Self Assessment, so freelancers who have incorporated must file too.
How to register for self assessment
To complete your Self Assessment online, you first need to register with HMRC to tell them you need to submit a tax return. You can learn about the process here.
You can register either online, by phone or by post (by completing form SA1 and sending it to your local tax office).
To register you will need:
- Your National Insurance Number
- Your personal details and those of your business
When do you have to register for Self Assessment?
The registration deadline is October 5th following the tax year for which you wish to submit a return.
For example, if you went freelance and set up your own business in June 2019, you would need to submit a Self Assessment for that tax year. This runs from 6th April 2019 until 5th April 2020.
To submit that Self Assessment, you would need to register by October 5th 2019, to submit it (and pay any owed taxes) by January 31st 2020.
If you miss the registration deadline there are penalties you must pay.
if you can prove to HMRC that your intentions are good and you still manage to submit your Self Assessment on time, these penalties can reduce. Your accountant can help you with the appeals process.
What will you get when you register for Self Assessment?
Your reward for registering for Self Assessment will be a Unique Taxpayer Reference Number (or UTR Number).
This is a ten-digit number that HMRC gives to those needing to complete Self Assessment to help streamline the process.
You will only have one UTR (much like a National Insurance Number), so if you have registered for Self Assessment before you don’t need to get a new one.
After you have registered for Self Assessment, HMRC will send you your UTR in the post.
You will need it to submit Self Assessments later, so keep it in a safe place.
Do you have to register for Self Assessment every year?
Once you register you will get a reminder to submit a Self Assessment every year until you inform HMRC you no longer need to complete one. This could be because you return to full-time employment or move aborad.
If you tell HMRC you don’t need to complete a Self Assessment but need to start filing personal tax again later on, you will have to re-register and get a new UTR.
How to keep freelance accounting records
Keeping proper freelance accounting records can be boring, but it will all be worth it when you come to complete your Self Assessment.
When you submit your Self Assessment Online return, having organised paperwork can save your lots of time and stress.
Or better yet, get yourself some online freelance accounting software.
Before you start, here is a small selection of the financial records you should have to hand when you go to complete your Self Assessment.
Many of these will not apply depending on the complexities of your finances; and this is not an exhaustive list.
Take a look at our freelance accounting glossary for more.
If you are a sole trader, this means all your invoices & business related expenses.
If you are running your own limited company and draw money from your business with a salary / dividend split, this will apply. You will need all the vouchers for dividends issued in the relevant tax year.
Details of any income you received through a Partnership.
You need information on interest on things like loans and credit cards, so get the relevant statements from your provider.
Own rental property? You’ll need details of all the income you’ve made through it in the previous tax year. Extra points if you receive your rental income into a separate bank account for ease of organisation.
Receiving any income from overseas? Keep the details handy.
If you pay into a pension you should keep details of all the payments you’ve made.
If you’ve done any charitable giving and claimed Gift Aid on it, you will need those details too.
Payment on Account
This means payments towards your last year’s tax bill – these will count against your income this year.
Redundancy lump payment or Unemployment benefit
If you left a full-time job or claimed Unemployment benefit in the last tax year, HMRC needs to know about it.
P11Ds are to inform HMRC of any benefits claimed by employees. If you have one for the last tax year, you’ll need it!
If you’ve made any profits disposing of things like property or shares, have these details handy too.
If in doubt, speak to a specialist
If you have a complicated financial setup, it is worth the money to engage an accounting specialist to complete your Self Assessment.
Signs it might be time to find yourself a good accountant:
- If any of the terms listed above gave you a headache
- If you think you have some of the above, but you’re not sure
- If you’re not sure which of the above relates to income and which to expenditure
- You are unsure of the tax law on how something is treated.
So now you know how to register, and what records you’ll need.
Take a look at our recommendations for the best freelance accounting software.
When should you complete your Self Assessment tax return?
You should complete your Self Assessment at the earliest possible opportunity. Of course, the majority of people do not.
The day of the online submission deadline (January 31st) is the busiest for those completing their personal tax returns.
Many freelancers and self employed contractors choose to leave their Self Assessment to the last minute.
That comes with risks.
When is the earliest you can submit your Self Assessment?
The organised among you will ask “When is the earliest I can submit my Self Assessment?”
The answer is the beginning of the new tax year, so 6th April.
To complete your Self Assessment you will need various tax forms from the previous year, like your P60, P45 and P11D.
Depending on how quick your accountant is these may not arrive for several weeks or months.
In practical terms, the earliest you can submit your Self Assessment is whenever you have all the necessary paperwork.
Why would you file your Self Assessment early?
There are a few advantages to filing your Self Assessment as early as you can. From a financial planning point of view you will know how much tax you owe earlier, allowing you to budget .
The deadline for paying owed tax is also January 31st, so having some time to plan for this expense is obviously preferable to submitting your Self Assessment on the deadline, finding you owe thousands and having to pay it out of pocket (or worse still, not being able to pay and incurring fines and penalties).
If you have over-paid tax, submitting your Self Assessment early means you will be first when HMRC issues refunds.
How to complete the Self Assessment tax return form (SA1)
Now it’s time to complete the Self Assessment tax return form (SA1).
If you’ve never filed a Self Assessment online before, you will need to create an account with HMRC Online Services.
You will need your Unique Taxpayer Reference number and either your postcode or your National Insurance Number.
Once registered, HMRC will send you an Activation Code.
You must use this code to activate your Online Services account within 28 days, or you’ll have to request another one.
Once you’ve activated your Online Services account you will have a User ID and password, you can use these to log in to HMRC Online Services and away you go!
If you want to see what you’re getting yourself into, HMRC have an online demonstration of their Self Assessment system.
If you’ve filed your Self Assessment Online before
If you’ve filed your Self Assessment online before, you’ll already have a User ID and password for HMRC Online Service. You can use this to log in and get started.
How to fill in the SA1 form
If you’ve done all your preparatory work, completing your Self Assessment online isn’t actually a particularly arduous task.
It amounts to transposing data from your financial records into HMRC’s system.
Here’s how to do it:
- The easiest and safest way to complete Self Assessment is to start with your records in front of you.
- Put each record to one side as you input the relevant data.
- This will mean that when you have no more records in your stack, your Self Assessment is complete.
- If you run across an item which you are not sure applies to you, you can remove it once you’ve put all your records to one side.
- HMRC’s system can save your progress for you, meaning you don’t have to complete your Self Assessment at once.
- If there’s an item you’re unsure about you can go away, read up on it or consult an expert, then come back to make sure it’s done .
- You can go back to edit previous sections before you finally submit your Self Assessment.
- The Online Services Self Assessment system has helpful tips while completing your return.
- Often the section you are filling in will tell you exactly where to look to find the information you need. Each field also has a little help tooltip next to it with more information.
It’s in everyone’s interest that your Self Assessment is accurate. HMRC help to make sure your information is correct and will highlight any errors it spots.
Once you’ve finished every section, you can review your tax return and finally, when you’re ready, file it.
You’re finished your Self Assessment tax return – and breathe!
What happens if you miss the Self Assessment deadline?
If you don’t submit your Self Assessment by 11:59:59pm on January 31st you’ll be in line for a fine.
If you miss the deadline you will get an on-the-spot £100 fine. After this initial penalty, you will have three months to file your Self Assessment.
Should three months pass and you have still not filed, HMRC will begin to fine you £10 per day for up to 90 days. If those 90 days elapse and you’ve still not filed, you’re in line for a fine of £300 or 5% of the tax you owe – whichever is greater.
For example, if a year should go by and HMRC have yet to receive your Self Assessment, you will have accrued a least of £1,600 in fines.
HMRC can punish people they think are withholding information from them. This includes a fine of up to 100% of their tax liabilities as well as the penalties above.
The moral of the story is do not delay.
HMRC claim their penalties encourage submission rather than generate income through fines. But everyone benefits from an accurate and on-time Self Assessment.