With autumn upon us, Christmas close behind and 2018 a mere 9 weeks away, the self-assessment deadline for tax year 2016-17 is fast approaching. If you are self-employed, or were self-employed at any point between 6 April 2016 and 5 April 2017, you will need to submit a self-assessment tax return by 31 January 2018.
How you feel about this will depend on how long you have been self-employed, how complicated your circumstances are and whether you currently pay someone else to do it for you. Whilst HMRC do publish a lot of guidance around the subject, personal tax is notoriously shifty with loopholes, exceptions and jargon which even the most seasoned professional will occasionally have to phone a friend about.
Here's my list of 5 things to think about if you are going through self-assessment for the first time:
1. Register in plenty of time. The deadline to register is 5 October in your SECOND year of being self-employed (so if I started up in May 2017, I need to register by 5 October 2018). Whilst it isn't a difficult process, you do need some paperwork to hand - your Unique Taxpayer Reference (UTR) for one, and an activation code for the online service which is - slightly ironically - sent in the post.
2. Make sure you keep good records of your income and expenditure. When I say "records" I mean some sort of sensible list of transactions. Excel is good, an accounting system - like Xero, which prompts you to create transactions for incoming and outgoing money in your bank account - is better. Please don't just keep a big old box of receipts and expect to be able to translate this easily into a completed tax return at the critical moment. Online banking portals normally enable you to generate an electronic record of transactions straight to CSV. Lovely stuff.
3. Keep track of the current guidance on allowable expenses. Never an exact science, the rules are open to quite a lot of interpretation but the general principle is genuine business expenditure can be offset against your tax liability. There are separate, and fairly convoluted, rules for capital expenditure (e.g. when you have bought an expensive asset to use in the business such as equipment, cars or machinery). The guidance here is pretty comprehensive:
4. Make sure you're aware of any additional income streams, schemes or allowances which apply to you. The big ones are things like charitable donations, dividends (if you are a company shareholder) and the Construction Industry Scheme (CIS) but there are lots of little bits and pieces which may occasionally apply.
5. Think about whether you really want to do this yourself or if you would be better of just farming it out to a professional. Whilst it isn't cheap to pay someone to do your tax return (a quick and unscientific bit of market research suggests £100 - £300 is pretty standard) it is a tax-deductible expense so you sort of get a bit of a discount! The form is not the worst I've ever seen, and there's lots of guidance available, but it is still time-consuming and confusing, meaning it may end up being a better use of your time and energy to just outsource the whole thing. If you do decide to go down this route, make sure you choose someone reputable, who asks you questions about your situation and tells the truth about what's gone on. It is not unknown for organisations specialising in self-assessment to just enter the same information in for all of their clients, regardless of what's actually happened. It doesn't happen much, but HMRC do carry out inspections and can impose hefty fines if your tax return is wrong.
If you would like to know more or have any questions about your self-assessment tax return, email me at firstname.lastname@example.org or find us on twitter @bulldog_ac