Do you have a self-assessment for your small business that you need to file but don’t know how to do it? Whether your first attempt at a self-assessment tax return or you’ve accomplished it before, you still need to comprehend a few aspects.
Whether you are a self-made business owner, freelancer, or have many earning sources (such as real estate or investments), you may need to file a yearly self-assessment tax return.
HRMC always mandates you to submit a tax return to ensure all your taxes are upheld correctly, even if you pay taxes through PAYE. The process may seem intimidating for many people, but it can be pretty straightforward in the right direction.
This guide will help equip you for the entire process and give tips and tricks to alleviate and make the procedure as clear as possible.
What is an HRMC self-assessment tax return?
A self-assessment is an approach of telling HMRC how much capital you made in a respective year as well as other data about your monetary situation so that the HMRC can specify which taxes and national insurance (NI) you owe; this can also be seen as “filing your tax returns and is often done online. Even though the phrase is ‘self-assessment’, you can charter an accountant, so you don’t have to do it all yourself. An accountant can have many advantages as they are more likely to complete the form correctly and minimise the taxes you have to settle.
Who is eligible to apply for a self-assessment tax return?
You must enlist for self-assessment if any of the following conditions apply to you, and it is also crucial to register as fast as possible to escape any penalties:
- If you are the proprietor of an enterprise (small or big) and earn more than £1000 annually.
- If you have an alliance with another business.
- If you are a director of a limited liability firm in which earnings are not subject to withholding tax or additional taxes.
Further, if you can associate with any of the following, whatever your occupational status is, then you will have to pertain for a self-assessment:
- Your annual earnings (without tariff relief) are more than £100,000.
- You have attained more than £2500 (or more than £10,000) before spending through property or real estate in the UK.
- You have acquired more than £10,000 in investment on savings, money in simple trust, trust stocks, or stock dividends.
- You have obtained a personal pension payment or contribution, including money in your pension basket, over your yearly or lifetime salary, an expenditure not authorised by the pension plan, or a foreign payment fee.
What is required for the submission of a self-assessment for a small business?
If you are filling in your tax application form on your own, then you must complete it by January 31st; this is also the due date for paying taxes; hence you should try to make sure that you have all the necessary steps finalised in advance so that you can be sure that you have all the resources to pay your taxes.
You also have the choice of submitting after the tax year (April 5th); this gives you a good habit of fulfilling your tax duties prematurely, which provides you with peace of mind for the rest of the year. If you decide to send your tax returns to the HRMC through the mail, it should be done before October 31st.
What is the registration procedure for an HRMC self-assessment for a small business?
If you did not submit your form for the prior tax year, you must register for a self-assessment form before referring it. The registration deadline is October 5th (at the end of the tax year).
A credible way to register is to utilise government verification websites; this will build an account giving you access to several government services. You must first deliver information to verify your identity through government-approved agencies such as Post Office, Barclay, and Experian. After adequately joining the website, it will be the primary method for registering and filing your tax returns.
Once enlisted, you will acquire a ‘Unique Taxpayer Reference number (UTR) for each tax return.
What documentation will I need to fill out a self-assessment form?
You must make sure you have the following documentation before you begin filling out your form:
- P60 or P45 (if you have a job for that year).
- A ledger of any other sources of revenue such as rent etc.
- Information about the following
- Details about work-related costs (if you are self-employed)
- List of acquisitions made this year
- Donations (if any have been made)
- List any assets that you may have acquired
- Benefits received (which includes child benefits)
- Pension earnings
- Paying back student loans (if it’s repaid)
- It is invariably important to keep track of all these documents carefully throughout the year and always have them in a secure place where you can easily access them at any time.
What are the risks involved with an HRMC self-assessment for small businesses?
Two common factors can put you at risk with a self-assessment tax return process:
1. Late submission and payment.
2. Provide the wrong information in your submission form.
Both of these risks can lead to fines. Setting a reminder to avoid delay is always a good idea, giving you more time to work on your account. The HRMC may pay benefits in some situations, such as bereavement; however, every case is studied on merit.
If you delay paying your taxes, you will receive interest in the amount owed from the due date (January 31st). The fine for late payments is much less than the fine for a late submission. Hence you must file your tax returns on time even if you don’t have the funds to pay your bills.
The second risk of providing accurate information is a little more difficult to process. A good way to evade this is to prepare all year round thoroughly. You should carefully record all your income, costs, spending, gains, and losses to avoid such risks. A good ledger can help make the process easier. You should also have a detailed manual and electronic record of all your invoices and receipts to keep checks on your ledgers during tax audits.
A good self-assessment is very important, especially for small businesses- from knowing what you should and shouldn’t do to clearly understanding due dates and fines. Overall clarity of the entire process can help drive your business in the right direction.