A question often asked by business owners is “do I need to complete a self assessment tax return?”
For self-employed individuals engaged in partnerships or possessing multiple income streams, you need to do a self-assessment tax return and to do so before it gets too late.
The deadline of January 31st will be here sooner than you think, so it’s advisable to address your self-assessment tax obligation as soon as possible.
Eligibility for self-assessment
Self-assessment applies to individuals whose income remains untaxed throughout the fiscal year, distinct from the PAYE taxation system.
Filing of a self-assessment tax return applies to the following groups:
- Sole trader self-employment. Earning over £1,000 (pre-expense deductions) through self-employment.
- Partnership involvement. Active participation in a business partnership.
- Earnings of £100,000 or more. Receiving an annual income surpassing £100,000.
- Additional income categories. This includes receiving COVID-19 grants, rental income, tips, commission, savings interest, investments, dividends, and foreign income.
- Specific obligations. Instances like the high-income child benefit charge mandates the completion of self-assessment.
Individuals unsure about self-assessment obligations can seek guidance on the official government website or talk to relevant accounting professionals.
Benefits of early completion
Getting your return done early won’t just provide you with peace of mind, but also gives you more time to double-check your calculations.
By completing it ahead of time, you’re empowered to use it in your financial strategies, therefore mitigating unforeseen financial issues in the coming year.
What’s more, if you need file a tax return for the first time, you’ll need to register for self-assessment by 5 October — or you could face a fine.
Components of a self-assessment return
If you need to file a self-assessment return, you must prepare your paperwork in several key areas.
Income
Income constitutes the majority of the self-assessment tax return and can come from sources such as:
- Employment. For limited company directors, referencing P60 or P45 forms aids in reporting salary.
- Sole proprietorship. For sole traders, complete income and expense accounting is imperative.
- Rental property. Furnishing property details, rental receipts, expenses, and mortgage payments are essential.
- Property sales. Disclosing sale particulars, including dates, prices, and associated costs
Additional sources of income include dividends, pensions, state benefits, capital gains, bank interest, and foreign income.
Professional advice is always recommended for these potential additional income sources.
Deductions and reliefs
Expense claims
Self-employed individuals can offset their business expenses against their taxable income to reduce their liabilities.
Consistently maintaining records of expenses throughout the year is recommended to avoid last-minute complications. Utilising cloud accounting software can also simplify this process.
Pension contributions
Your annual pension statement and the name of your provider should be included in your tax return — only if you’re a high earner — if you wish to claim additional tax relief for contributions to a personal pension scheme.
Charitable contributions
Higher-rate taxpayers can get extra tax relief by declaring charitable donations, including the charity’s name, donation date, amount, and confirmation of gift aid claims.
Professional guidance and assistance and utilising expertise
Given the intricacies of tax legislation and individual financial circumstances, this overview should be regarded as a preliminary guide to self-assessment.
Collaborating with professionals becomes pivotal, particularly for sole traders, partnership entities, and individuals with multiple income streams.
By entrusting us with your tax return, you’ll receive a comprehensive and effective result.
Contact us today to ensure a seamless and punctual completion of your self-assessment tax return.