Self-Assessment tax services:
If you are employed by an employer then that employer is responsible for paying your PAYE tax, national insurance and pension payments. But what will happen If you are self-employed and work for yourself then an annual tax return needs to be submitted to HMRC detailing your annual income and expenses, hence reaching to tax liability and national insurance payments. We at Businesswise Accountants specialises in self-assessment tax returns and will serve you with best expert skills and knowledge.
Who needs to submit self-assessment return:
If you are self-employed then it is your responsibility to inform HMRC about the income you received and expenses you incurred and even if you have made loses or no profit, moreover if you haven’t started trading but have registered yourself for self-employment then you have to tell HMRC before the deadlines.
What is self-assessment tax return:
Self-assessment tax return contains taxable income hence that will determine how much tax are you going to pay in particular financial year on income earned through self-employment, this returns also include national insurance 2 and national insurance 4 contributions depending on your profit at the end.
How to register for self-assessment:
Quickest and most swift way to get register for self-employment is through online registration, you make government gateway account after completing the questions. You will receive unique tax reference number (UTR) within 10 days and after will receive an activation code. Unique Tax Reference codes are 10-digit codes that uniquely identify you or your business. They’re used by HMRC whenever they’re dealing with your tax.
Advantages of self-employment:
As a self-employed you are more independent in terms of work hours and creative freedom along-with independent decision making. You can reward yourself for all the work you have done because you are sole decision maker here. This will motivate you and bring utmost job satisfaction as a result and you will feel compensated for all your hard work and will start loving your work. You can work from home and could save money through less travelling cost and also can save time. If you are employed then you are bound to follow a set pattern and similar situations and clients over and over and this can boring sometimes but as a self-employed you get an opportunity to deal with variety of clients and this can beneficial in your personal and professional development.
What are disadvantages of being self-employed:
As a biggest downside is that as a self-employed you are responsible for all your taxes and contributions towards HMRC, unlike in employment where tax was automatically deducted from your payment before you received it. Secondly you are not entitled for employee benefits like in recent history employed persons was furloughed due to COVID19 but slef-employed weren’t lucky enough. Similarly you are not entitled to holiday pay and sick pay. You will have to work long hours instead of fixed hours and income stream can be unpredictable and uneven which will make home budgeting difficult for some people.
Self-assessment return is done via SA100 and its basically inform HMRC about your annual income and all the allowable expenses. There are other forms to report foreign income, capital gains and foreign income. It maybe looks straightforward to figure out total income if you have one stream of income but can be difficult when you have more than one stream of income. Categorising the allowable expenses needs careful treatment from a competent and qualified accountant and we just do that.
As a self-employed your business will have numerous types of costs that will occur over the period of time, all the costs which are allowable can be deducted from total revenue to reach the taxable income. Any expense which you have done for business is allowable, so careful and delicate treatment of your expenses is necessary to minimize your tax liability and stay compliant. Few examples of common allowable expenses are material cost, staff cost, power cost, vehicle cost, property rental cost and there are many more which can only be specific to your business and industry
Deadline to get register for self-employment for the financial year 2021/2022 is 05 October 2021, while deadline to file paper tax return for year 2020/21 is December 2021 and for online return it will be 31 st January 2022. Remember not to leave the submission until last minute and allow yourself extra time to submit and pay the bills as well.
Penalties for not filling on time:
You will have to pay late filling fee for late submission of tax return which £100 if your return is 3 months late, this can increase if you further delay your submission. Tax bill should be paid on time and any delay in payment can lead to interest charger over on tax bill
Payment of tax bill
Self-assessment can be paid through most of contemporary payment methods for tax payments, it includes direct debit payment, online transfer, at your bank, cheque payment and online or phone transfer. If only you have few days lift to pay your tax bill then online transfer is best option as compared to cheque payment.
Payment on account:
Payments on account are advance tax payments towards your next bill, if for a particular year your tax liability is more than £1000 then you have to make advance payments towards next year tax bill. First payment on account is in January before the tax year ends and second payment is in July. Payment on account is based on tax bill of last year and any outstanding amount after tax submission should be paid before 31 st January next year, and if you believe your next tax liability is going to be less than last year significantly then you can inform HMRC and request them to reduce your payment on account bill.
Why you need us, expert opinion:
Tax return for self-employed individuals or businesses can be strenuous and complex tax and demands a delicate handling of all the income and expenses to reach a true and fair tax liability, you need a competent and qualified accountant who will ensure that you stay compliant with tax rules and all your requirements are met on time.