<\/span><\/h2>\nKeeping proper freelance accounting records can be boring, but it will all be worth it when you come to complete your Self Assessment.<\/p>\n
When you submit your Self Assessment Online return, having organised paperwork can save your lots of time and stress.<\/p>\n
Or better yet, get yourself some online freelance accounting software.<\/p>\n
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.<\/p>\n
Many of these will not apply depending on the complexities of your finances; and this is not an exhaustive list.<\/p>\n
Take a look at our freelance accounting glossary for more.<\/strong><\/p>\nSelf-Employment income<\/strong><\/h3>\nIf you are a sole trader, this means all your invoices & business related expenses.<\/p>\n
Dividends<\/strong><\/h3>\nIf 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.<\/p>\n
Partnership income<\/strong><\/h3>\nDetails of any income you received through a Partnership.<\/p>\n
Interest<\/strong><\/h3>\nYou need information on interest on things like loans and credit cards, so get the relevant statements from your provider.<\/p>\n
Rental income<\/strong><\/h3>\nOwn rental property? You\u2019ll need details of all the income you\u2019ve 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.<\/p>\n
Foreign Income<\/strong><\/h3>\nReceiving any income from overseas? Keep the details handy.<\/p>\n
Pension contributions<\/strong><\/h3>\nIf you pay into a pension you should keep details of all the payments you\u2019ve made.<\/p>\n
Gift Aids<\/strong><\/h3>\nIf you\u2019ve done any charitable giving and claimed Gift Aid on it, you will need those details too.<\/p>\n
Payment on Account<\/strong><\/h3>\nThis means payments towards your last year\u2019s tax bill \u2013 these will count against your income this year.<\/p>\n
Redundancy lump payment or Unemployment benefit<\/strong><\/h3>\nIf you left a full-time job or claimed Unemployment benefit in the last tax year, HMRC needs to know about it.<\/p>\n
P11D<\/strong><\/h3>\nP11Ds are to inform HMRC of any benefits claimed by employees. If you have one for the last tax year, you\u2019ll need it!<\/p>\n
Capital Gains<\/strong><\/h3>\nIf you\u2019ve made any profits disposing of things like property or shares, have these details handy too.<\/p>\n
<\/span>If in doubt, speak to a specialist<\/strong><\/span><\/h2>\nIf you have a complicated financial setup, it is worth the money to engage an accounting specialist to complete your Self Assessment.<\/p>\n
Signs it might be time to find yourself a good accountant:<\/p>\n
\n- If any of the terms listed above gave you a headache<\/li>\n
- If you think you have some of the above, but you\u2019re not sure<\/li>\n
- If you\u2019re not sure which of the above relates to income and which to expenditure<\/li>\n
- You are unsure of the tax law on how something is treated.<\/li>\n<\/ol>\n
So now you know how to register, and what records you\u2019ll need.<\/p>\n
Take a look at our recommendations for the best freelance accounting software.<\/strong><\/p>\n<\/span>When should you complete your Self Assessment tax return?<\/strong><\/span><\/h2>\nYou should complete your Self Assessment at the earliest possible opportunity. Of course, the majority of people do not.<\/p>\n
The day of the online submission deadline (January 31st) is the busiest for those completing their personal tax returns.<\/p>\n
Many freelancers and self employed contractors choose to leave their Self Assessment to the last minute.<\/p>\n
That comes with risks.<\/p>\n
<\/span>When is the earliest you can submit your Self Assessment?<\/strong><\/span><\/h2>\nThe organised among you will ask \u201cWhen is the earliest I can submit my Self Assessment?\u201d<\/p>\n
The answer is the beginning of the new tax year, so 6th April.<\/p>\n
To complete your Self Assessment you will need various tax forms from the previous year, like your P60, P45 and P11D.<\/p>\n
Depending on how quick your accountant is these may not arrive for several weeks or months.<\/p>\n
In practical terms, the earliest you can submit your Self Assessment is whenever you have all the necessary paperwork.<\/p>\n
<\/span>Why would you file your Self Assessment early?<\/strong><\/span><\/h2>\nThere 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 .<\/p>\n
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).<\/p>\n
If you have over-paid tax, submitting your Self Assessment early means you will be first when HMRC issues refunds.<\/p>\n
<\/p>\n
<\/span>How to complete the Self Assessment tax return form (SA1)<\/strong><\/span><\/h2>\nNow it’s time to complete the Self Assessment tax return form (SA1).<\/p>\n
If you\u2019ve never filed a Self Assessment online before, you will need to create an account with HMRC Online Services.<\/p>\n
You will need your Unique Taxpayer Reference number and either your postcode or your National Insurance Number.<\/p>\n
Once registered, HMRC will send you an Activation Code.<\/p>\n
You must use this code to activate your Online Services account within 28 days, or you\u2019ll have to request another one.<\/p>\n
Once you\u2019ve 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!<\/p>\n
If you want to see what you\u2019re getting yourself into, HMRC have an online demonstration of their Self Assessment system.<\/p>\n
If you’ve filed your Self Assessment Online before<\/strong><\/h3>\nIf you\u2019ve filed your Self Assessment online before, you\u2019ll already have a User ID and password for HMRC Online Service. You can use this to log in and get started.<\/p>\n
Login to HMRC Online Services here.<\/p>\n
<\/span>How to fill in the SA1 form<\/strong><\/span><\/h2>\nIf you\u2019ve done all your preparatory work, completing your Self Assessment online isn\u2019t actually a particularly arduous task.<\/p>\n
It amounts to transposing data from your financial records into HMRC\u2019s system.<\/p>\n
Here’s how to do it:<\/p>\n
\n- The easiest and safest way to complete Self Assessment is to start with your records in front of you.<\/li>\n
- Put each record to one side as you input the relevant data.<\/li>\n
- This will mean that when you have no more records in your stack, your Self Assessment is complete.<\/li>\n
- If you run across an item which you are not sure applies to you, you can remove it once you\u2019ve put all your records to one side.<\/li>\n
- HMRC\u2019s system can save your progress for you, meaning you don\u2019t have to complete your Self Assessment at once.<\/li>\n
- If there\u2019s an item you\u2019re unsure about you can go away, read up on it or consult an expert, then come back to make sure it\u2019s done .<\/li>\n
- You can go back to edit previous sections before you finally submit your Self Assessment.<\/li>\n
- The Online Services Self Assessment system has helpful tips while completing your return.<\/li>\n
- 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.<\/li>\n<\/ol>\n
It\u2019s in everyone\u2019s interest that your Self Assessment is accurate. HMRC help to make sure your information is correct and will highlight any errors it spots.<\/p>\n
Once you\u2019ve finished every section, you can review your tax return and finally, when you\u2019re ready, file it.<\/p>\n
You\u2019re finished your Self Assessment tax return – and breathe!<\/p>\n
<\/span>What happens if you miss the Self Assessment deadline?<\/strong><\/span><\/h2>\nIf you don\u2019t submit your Self Assessment by 11:59:59pm on January 31st you\u2019ll be in line for a fine.<\/p>\n
If you miss the deadline you will get an on-the-spot \u00a3100 fine. After this initial penalty, you will have three months to file your Self Assessment.<\/p>\n
Should three months pass and you have still not filed, HMRC will begin to fine you \u00a310 per day for up to 90 days. If those 90 days elapse and you\u2019ve still not filed, you\u2019re in line for a fine of \u00a3300 or 5% of the tax you owe \u2013 whichever is greater.<\/p>\n
For example, if a year should go by and HMRC have yet to receive your Self Assessment, you will have accrued a least of \u00a31,600 in fines.<\/p>\n
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.<\/p>\n
The moral of the story is do not delay.<\/p>\n
HMRC claim their penalties encourage submission rather than generate income through fines. But everyone benefits from an accurate and on-time Self Assessment.