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The phrase “tax return” is enough to make any self-employed person break out into a sweat, but it’s unfortunately something we have to do every year.
According to 2019 data from HMRC, more than 93% of Self Assessment tax returns were completed by the deadline in 2017/2018. The majority filed on time, but 700,000 customers missed the cut-off point.
Most UK taxpayers have their taxes deducted automatically from their wages, pensions or savings, so don't need to file a tax return. But those who are self-employed or who haven't had tax automatically deducted - or earn extra untaxed income - will need to file a tax return.
The deadline for filing your tax return in 2021 is 11.59pm on 31 January and failing to do so on time can lead to a fine of at least £100 ($133.50).
Doing your taxes isn’t an exciting experience, but it’s something many of us still have to do. So how can you make the process a little easier?
Gather the information you need
If you keep a spreadsheet with invoices and payments, make sure you have it to hand. You will need your National Insurance number, your UTR number, your accounts, invoices, receipts or other records of income, and records of any relevant expenses. You will also need your contribution to pensions or charities, as well as your P60 or P45 forms.
Give yourself enough time
It’s tempting to put off doing your tax return until the last possible minute, but leaving yourself more time will be far less stressful. It can take longer than you think to get all your invoices and information together in one place.
If you’re stuck, don’t struggle alone and make mistakes. You can get help with your self assessment tax return from the TaxAid website, or find information about self assessment on Gov.uk and on the Low Incomes Tax Reform Group website. You can get help with your self assessment tax return from the TaxAid website.
Get an accountant
The most stress-free way to file a tax return is to have somebody else do it for you, if you have the finances to do so. An accountant can deal with your paperwork and make sure you’ve not forgotten or missed anything. Accountants usually charge between £200 and £400, plus VAT.
Remember your expenses
If you are self-employed you can claim expenses such as a proportion of energy costs if you work from home, stationery and travel costs. You do not need to send in proof of expenses when you submit your tax return. However, you should keep proof and records so you can show them to HM Revenue and Customs if you are asked to.
Keep your tax money separate
If you are self-employed, it’s a good idea to keep the money you will need to pay your tax separate from your own savings. Every time you get paid, transfer a percentage over to your tax account so there aren’t any nasty surprises when it comes to paying your tax in January.
Check if you need to fill in a self-assessment tax return
More than 11.5m people filed a self-assessment tax return for the last tax year. Before you get started, it’s important to check if you actually need to fill one in.
You will need to do a tax return if:
You are self-employed and your income is more than £1,000.
Your income was more than £50,000, and you or your partner claimed child benefit.
You earned more than £2,500 from renting out property, or from other untaxed income such as tips or commission.
You earned more than £100,000 in taxable income.
You earned £10,000 or more before tax from savings, investments, shares or dividends.
You earned income from abroad, or lived abroad and had a UK income.
You need to pay capital gains tax.
You received income from a trust.
Your state pension was more than your personal allowance and was your only source of income (unless you started getting your pension on or after 6 April 2016).
HMRC has told you that you didn't pay enough tax last year (and you haven't already paid up through your tax code or voluntary payments).
You filed a self-assessment tax return last year (even if you didn't owe any tax). You'll need to do this unless HMRC has already written to you to say you don't need to file one.
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