You must complete a self-assessment income tax return if you are in business, either as a self-employed person or as a company director. Simple planning and the right advice can make completing your income tax return relatively painless.
Self-assessment tax return timescales
You need to file your income tax return online by 31 January following the end of the tax year (5 April). If you want to file a paper income tax return instead, there is an earlier 31 October deadline. Your self-assessment tax return planning needs to work towards these deadlines. Failure to file your return and pay any resulting tax due on time will result in penalty charges.
If you need to complete a self-assessment tax return, you may be notified automatically by HM Revenue & Customs (HMRC). If you aren't, it's up to you to let them know that you need to file a return. If you were self-employed during the previous tax year and HMRC doesn't already know, you must register by 5 October at the latest.
You can complete your income tax return yourself or ask your accountant to do it. If you are doing your own self-assessment tax return, you will probably want to do it online. You will need to register for HMRC online services. Bear in mind that it can take about a week to activate online access, so leave enough time.
If you are using a paper self-assessment tax return, you should also allow time for any postal delays - either in receiving the forms or delivery of the completed income tax return to HMRC. You will also need to check that you have got all the pages that you need to complete, and if necessary ask for additional supplementary self-assessment tax return pages to suit your circumstances.
All UK small businesses now have an online personal tax account. You can view your tax transactions across the range of business taxes including Self Assessment, Corporation Tax, VAT and PAYE for employers and to make payments at any time.
Self-assessment tax return records
Completing your self-assessment tax return can be relatively straightforward, provided that you have well-organised tax records. These need to include details of any employment income and other types of personal income, such as savings income or capital gains from selling investments. You also need details of any reliefs you will be claiming on your income tax return such as for pension contributions or gifts to charity.
If you are self-employed, you'll need your business tax records. If you run your business as a company, the company will need to complete a separate corporation tax return. If you are in a partnership, you'll need to include details of your share of the partnership income on your self-assessment tax return, but the partnership also needs to file a partnership tax return.
Completing the self-assessment tax return
How complicated your self-assessment tax return is depends on your circumstances. If you are self-employed, with simple finances and a turnover below £70,000, completing your self-assessment tax return should be relatively easy.
If you file your return online, the online system will tailor the return to your circumstances based on your answers to a few simple questions. This means you can be sure you have completed all the required sections. If you complete the paper return, you will need to make sure you have all the relevent sections before you start.
HMRC has introduced two simpler income tax schemes for small businesses - 'Cash Basis' and 'Simplified Expenses' designed to make it easier for you to manage your income tax obligations.
A self-employed income tax return is more straightforward if you choose to match your accounting year to the tax year, so that you report profits for the year to 5 April. But a different accounting year end may suit you better, for example by deferring tax payments. You may want to take advice.
Other self-assessment tax return complications can include:
- dealing with capital allowances if your business has spent more than the Annual Investment Allowance of £200,000 on plant and machinery
- if you own or lease a car for your business rather than claiming a mileage allowance for using your private car
- if you make a loss, or have previously made losses, and need to know the best way to use them to reduce your tax liability
- dealing with special situations, for example the arrangements applying to businesses including farmers, authors, foster carers and barristers
- if you need to provide estimates or provisional figures
You can find guidance on the HMRC website or contact the HMRC self assessment enquiry line on 0300 200 3310, but may find it easier to get advice from your accountant. Your accountant can also offer advice on business tax planning to minimise your taxes.
You can also find guidance on the simplified expenses schemes for the self employed on the GOV.UK website.
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