When you’re starting out with your own business there are many financial factors to take into account. One that makes an impact on your personal finance is paying tax through Self Assessment.
Paying tax – Self Assessment returns
Self Assessment is HRMC’s system for people who don’t pay tax on their earnings through PAYE (Pay As You Earn). It enables individuals to calculate and pay tax on the money that they earn.
Tax and Self Assessment – when to register with HMRC
It’s important to register with HMRC as soon as you’ve set up your new business. Even if you’re already paying tax by Self Assessment you could face penalties if you don’t register online for business taxes.
Self Assessment forms are issued every April covering the previous 12 months – the tax year to 5th April that has just passed. While HMRC generally automatically send forms to those who are paying tax through Self Assessment returns. If they haven’t sent you one it’s your own responsibility to ask for one.
Self Assessment tax returns are normally required for people who are:
- A company director.
- A minister of religion.
- Getting income from letting property or land that they own.
- Receiving other untaxed income or significant capital gains not covered in a PAYE tax code.
- A member of Lloyds of London insurance and reinsurance market.
- Receiving annual income from a trust or settlement or income from the estate of a deceased person and further tax is due on that income.
- Getting a taxable foreign income, even if you don’t normally reside in the UK.
Completing Self Assessment tax returns
Once you’ve received your Self Assessment form you’ll need to choose whether you’d like to complete it online or by post.
If you choose to complete your return online you’ll need to register as soon as possible and then you’ll have until 31st January of the following year to file it with HMRC.
If you choose to complete your form by hand and to return it by post you’ll need to have it with HMRC three months earlier, by 31st October.
Offering you the ability to complete the form at your leisure and to check your information over the course of more than one sitting. Filing online is becoming increasingly popular. Self assessment tax returns also have the added benefit of your tax being automatically calculated for you once you’ve input all of the data. The form can be sent and acknowledged at the click of a button. Online returns are also likely to be processed more quickly.
While registered for Self Assessment you’re required to keep your paperwork up to date and knowing what you need and keeping it all together in one place can be a good start. You probably won’t have to send any of your paperwork with your tax return. However, if you do, make sure to send copies and keep hold of your originals.
The documents you’ll need to have at hand include:
- Details of pay and taxable expenses and benefits received from your employer.
- Self-employment accounts.
- Bank and building society statements.
- Paying in and chequebook stubs.
- Dividend vouchers.
- Details of capital gains realized.
- Paperwork for other income – for example, investments, savings, pensions, property or benefits.
- Documentation of anything you can claim for, such as self-employed expenses or charitable donations.
Once you have everything handy you’ll need to complete the SA100 form and any other additional sections that are relevant to you. You should receive all of these in your Self Assessment tax return pack. You only need to complete the questions that apply to you and there is no need to put anything in the sections that don’t.
Once these are complete, double check that you’ve included all relevant pages and information and sign the form. You’ll then be ready to send it off and pay any money owing.
Starting your business – tax, Self Assessment and more
Before registering your business with HMRC, you’ll need to register your business with Companies House – a process that can be simple and straightforward and takes as little as three hours with The Formations Company.