If you’ve registered as Self-Employed, you’ll receive a letter in April each year asking you to complete your Self-Assessment tax return online for the previous financial year.
For example, in April 2014 you’ll be asked to complete a tax return with details from 6th April 2013 to 5th April 2014. Often it is easier to use the dates 1st April to 31st March. If your business financial year ends in a different month ask your Accountant for advice on the dates to use to fill in your return.
The main part of the return is to fill in your straightforward details of name, address, business name and address, etc.
You are then required to fill in additional pages depending on your circumstances;
Income from Self-Employment – details from your profit and loss and balance sheet reports.
Employment Income – if you’ve been employed as well as self-employed, details from your P45 or P60.
Income from UK property – from property rented out.
Any other income or gains – savings interest or investment income for example.
Filling in the return online allows you to click on a ‘?’ to define anything you don’t understand. You can save it at any point and come back to it later.
As soon as it is completed, the tax and national insurance amounts are calculated so that you know what is due for payment.
Your online return must reach the HMRC by midnight on 31st January.
Your first payment is due on 31st January. The amount to be paid is the balancing payment for the tax year plus a payment on account towards the next year.
Your second payment is due on 31st July. The amount to be paid is the second payment on account towards the next year.
Using an example from the HMRC;
Mrs A completes her 2011-12 (April 11 – March 12) return and finds out that she has £4,500 tax to pay.
Because she completed a tax return the previous year, she has already made two payments on account towards this amount – £2,000 in January 2012 and £2,000 in July 2012.
She must make a balancing payment of £500 by 31 January 2013.
Her payments on account for the 2012-13 tax year will be £2,250 each, this is half of the tax that was due for 2010-11 (£4,500 divided by 2)
These payments are due on 31 January 2012 and 31 July 2012.
Be aware that if your business is making a profit, as a sole trader you will be taxed on all this profit (minus your personal tax allowance), so make sure you put up to a third, if at all possible, of your profits into a savings account ready to pay the HMRC each January and July.
Record all your business transactions so that you can easily enter the information required on your Self-Assessment.
Keep all your business and personal bank and savings statements, as you will need to record any interest you received during the year.
Keep a record of any other income received.
- If you’re self-employed you must complete a self assessment tax return each April for the previous year
- You must provide details of all income
- If you complete it online the tax and national insurance amounts are calculated for you
- Your online return must reach HMRC by midnight on 31st January
- Your first payment is due on 31st January – the balancing payment for the tax year plus a payment on account towards the next year
- Your second payment is due on 31st July, a second payment on account towards next year
- As a sole trader you will be taxed on any profit, put a portion in savings ready to pay
- Keep records of your business transactions, bank statements and interest received during the year