If you’re self-employed, the words ‘self-assessment tax return’ may well evoke a feeling of dread or frustration, but it doesn’t have to be that way! Self-assessment tax returns aren’t an issue for most people in conventional employment as their tax is deducted at source through pay as you earn, but the picture is different for most self-employed people.

Having an understanding of the process and ensuring that prior preparation is done before submitting a tax return can help make it less onerous. Alternatively, you can appoint an accountant to take care of it for you. Read on for the lowdown on self-assessment tax returns including what they are, who must file them, deadlines, tips and how Gorilla Accounting can help you.

What are Self-Assessment Tax Returns?

The self-assessment tax return (SA100) is how self-employed people and individuals report their income, capital gains and expenses to HMRC. The information submitted is then used by HMRC to calculate tax liability to ensure that the right amount of income tax and National Insurance contributions are being paid.

Do you have to Submit a Self-Assessment Tax Return?

Self-assessment tax returns aren’t mandatory for everyone, but around 12 million people must complete one each year if they fall into any of the below categories:

  • Self-employed as a sole trader earning more than £1,000 before any tax reliefs
  • A limited company director receiving income that’s untaxed such as dividends
  • A partner in a business partnership
  • Receiving PAYE income over £100K in 2022/23 or £150K from 2023/24 onwards.
  • Receiving child benefit and your income or your partner’s income is above £50,000
  • A higher or additional rate taxpayer paying into a personal pension
  • Earning additional untaxed income above a certain threshold, such as dividends or bank interest.
  • Receiving income from rental property
  • Wanting to claim certain tax reliefs
  • Sold assets in the tax year, such as additional properties, crypto, shares or investments held outside of an ISA wrapper and have realised taxable capital gains

These criteria can change so it’s important to keep abreast of any changes in the HMRC official guidelines to ensure you are compliant.

When is the Self-Assessment Tax Return Deadline?

Being aware of the self-assessment tax return submission date relevant to you is important so that you allow yourself enough time to prepare and file your tax return.  Nobody wants a last minute rush! Submission dates vary depending on whether you submit a paper tax return or submit digitally. The vast majority – around 96% – complete their tax return online.

Key dates are below:

  • 5th October – Deadline for self-employed people and sole traders to register for self-assessment for the first time
  • 31st October – Deadline to file your paper self-assessment tax return
  • 30th December – Deadline to file your online self-assessment tax return for the preceding tax year
  • 31st January – Deadline to file online self-assessment tax returns and settle of any tax due for payment from the preceding tax year

It’s also important to note that the tax year runs from 6th April – 5th April.

It pays to be diligent and ensure that you file your returns on time and pay any tax owed by the deadline to avoid potential HMRC investigations and penalties which can be both time-consuming and expensive. You also don’t want to increase your liability by paying interest on any overdue tax.

What are the Penalties for Late or Inaccurate Self-Assessment Tax Returns?

If your self-assessment tax return contains errors or inaccuracies, or if it’s filed after the deadline, it’s possible that you will receive a penalty from HMRC.

The penalties for late submission of your self-assessment tax return are:

  • 1 day – A £100 penalty
  • 3 months – A £10 a day penalty for a maximum of 90 days (£900)
  • 6 months – A further penalty of 5% of the tax you owe or £300 (whichever is higher)
  • 12 months – A further penalty of 5% of the tax you owe or £300 (whichever is higher)

The penalties for paying your tax liability after the deadline are:

  • 30 days– 5% of the tax you owe at that date
  • 6 months late – A further penalty of 5% of the tax you owe at that date
  • 12 months late – A further penalty of 5% of the tax you owe at that date

A behaviour-based system is used to determine the penalty for any errors or inaccuracies in your self-assessment tax return. The severity depends on whether the errors or inaccuracies were accidental or deliberate.

  • For any errors caused by a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
  • For errors that are deliberate, the penalty will be between 20% and 70% of the extra tax due
  • For concealed and deliberate errors, the penalty will be between 30% and 100% of the extra tax due

Penalties can be appealed to HMRC but there’s no guarantee of success and an appeal can be a time consuming process. It’s best to avoid penalties altogether by submitting a timely and accurate return.

How do you Complete your Self-Assessment Tax Return?

If you’re completing your self-assessment tax return for the first time, it might not be an easy process. But familiarity with it will make things easier over time.

The first step is to register for self-assessment with HMRC. You must register immediately when you become self-employed or if you trigger any other criteria that mandates you to complete a self-assessment tax return, such as receiving rental income. Registration can be completed on the HMRC website.

You’ll then need all necessary documents to complete your return. This includes records of your income and expenses, receipts, bank statement as well as your unique taxpayer reference number. Details of other income that you’ve received, for example from investments, dividends or savings, will also be required. If you’ve been employed, you’ll need a P45 or P60 form and a P11d form if your employer has paid you and expenses or benefits.

You can then sign in online to complete your self-assessment tax return using your Government Gateway ID and must follow the instructions to work your way through the form entering all required details.

When you have inputted all required information, you can review and confirm everything and then submit your return. Using the information you provide, HMRC’s system will then calculate the amount of tax you owe and various payment options are available to settle up including online payments and direct debit.

How can you make the Self-Assessment Tax Return process easier?

We understand that the self-assessment tax return process can be difficult for the uninitiated, so here are some tips to help.

Maintain Organised Records

By maintaining accurate and organised financial records throughout the year, this will mean you don’t have the burden of having to get everything organised when the submission deadline is looming and will make the whole process easier. It pays to prepare and plan ahead.

Take Advantage of Accounting Software

By using accounting software, such as FreeAgent which we provide free of charge to all our clients, your financial records can be updated on the go and your self-assessment tax return can be calculated in the background while you work. This automation is a huge time-saver and can also reduce the chances of any errors.

Optimise Your Tax Position

By claiming all available tax reliefs and deductions, you can reduce your overall tax liability while remaining compliant and increase your take home pay.

Save for your Tax Bill

Ensure that you have sufficient funds in place to pay your tax liability each year. Having a dedicated savings account and paying into it each month with standing order is a great way to set aside funds. It’s also possible to make twice yearly payments on account to get ahead with tax bill

Meet the Deadlines

It goes without saying that meeting the submission and payment deadlines, as well as having no errors on your submission, is necessary to avoid any HMRC involvement.

Work with an Accountant

The 31 January 2024 self-assessment tax return deadline is approaching fast and appointing an accountant to complete your return can take the heat off.

We understand that as a self-employed person you will be busy and time can be in short supply. Completing and submitting your return can be a time-consuming process and it’s much easier to have an accountant in your corner to do the legwork.

Gorilla Accounting are self-assessment tax return experts! Our self-assessment service starts from only £200 + VAT and we’ll ensure that your return is completed correctly and submitted on time, eradicating the risk of HMRC investigations, errors and penalties. If you’re a Gorilla Accounting client, your annual self-assessment tax return is included as part of our service.

If you have any queries about your self-assessment tax return you can speak to an expert accountant on 0330 024 0406 or request a callback here.

To appoint us to complete your self-assessment tax return, please submit our personal tax questionnaire here.