Five Steps to a Successful First Self-Assessment Tax Return
Every year new taxpayers enter the self-assessment system. And it can be a bit scary, especially for the first time. Potential fines or deadlines for mistakes increase the pressure of missed situations.
There are five regular errors in self-assessment tax returns, especially for first-time filers. Here are five ways to make sure your first self-assessment tax return is successful.
Allocate preparation time
It’s not just a question of filling out a form the day before the deadline. You will need to set aside time for two important preparatory work: to register with HMRC and to choose your payment method.
Registration with HMRC
You must have at least 20 days to register with HMRC. After you apply online, you will be sent your Unique Taxpayer Reference (UTR) number. It takes up to 10 days for the post to arrive. You will then be sent an activation code in the post. Again, this can take up to 10 days to reach you. These are shipped separately for security reasons.
You cannot set up your online tax account without your UTR and activation code. And you can’t file your self assessment tax return without your online tax account.
Sometimes the HMRC will allow an extended period of time to file your tax return if you are late in registering. This will be three months from the date of your registration. But this one is not paid. And if you do not receive this extension, you will be penalized separately for late filing and late payment.
Different payments take different time to process. It is important that your tax bill payment is in HMRC’s account within the time limit. It’s up to you to sort it out.
For example, if you want to pay by direct debit, you need to allow five working days to pay into HMRC’s bank account. If you send it within the time limit, HMRC will classify it as late payment even if it does not receive it.
Include all income streams and keep your proof
Multiple income streams make it more complicated to file your self-assessment tax return. And a growing number of taxpayers are making money from multiple sources. It all goes to a self-assessment tax return.
It is very important that you include your self-employed and / or employed earnings in addition to what you earn. Everything related to HMRC, including:
The HMRC must examine and deliberately fail to include income will be treated as tax evasion or tax evasion (both are taken very seriously).
Determines the amount and type of money you earn and how much tax you pay.
Basically, all the evidence you need is in your normal business record. Each receipt, invoice, bank statement and P60 supports your tax return information. There is no HMRC format for keeping your records. But your record must be “accurate, complete and readable.”
You must keep these records for at least five years after 31St. They mention January after the end of the tax year. But many businesses hold them for much longer. The cause and the HMRC investigation, for whatever reason, could go back 20 years.
Choose the right accounting method
There are two accounting methods that you can choose from, ‘Traditional Accounting’ and ‘Cash Based’.
On a cash basis
If you are a small business or sole trader, cashing is probably the best accounting method for you. This means that everything is actually based on what comes and goes from your bank account. You will not pay tax on invoiced but unpaid money.
This accounting method is more suitable for larger businesses or for more complex structures. In this case, you record and pay the tax on the invoiced money even if you have not yet received the payment.
Allowances and expenses
There is a huge list of tax free allowances for which you may be eligible. You must include everything that applies to you in your self assessment tax return.
HMRC allows for a variety of work costs. The way you claim is different for employees and self-employed taxpayers.
If you are an employee, this means that you can get tax relief on the expenses you incur for the work. Unless your boss will definitely refund you for that cost.
If you are self-employed, you deduct your total costs from your profits. This reduces the amount of tax you have to pay.
Get help if you need to file your tax return
You do not have to go through this process yourself. Get an accountant or tax professional to go through the process with you or for you. Other than finding out which tax reliefs and allowances apply to you, you may be fine with everything. That’s right, get in touch and we’ll pick that bit. Or if the whole thing is giving you hebei-jibis, we can do the whole thing for you. And that includes talking to HMRC on your behalf.
What’s great is that all you have to do with your tax position is take care of an online form. HMRC’s support is varied and of good quality. And we’ve got a number of free guides to make sure that even first-time filers have all the information they need.
Like most things, the first time you go through the process it takes a long time. But the reason is all new. Soon you will be one of those blus business owners who send their tax returns on the 6thM April. Until then, we are here to help.
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