Who needs to complete a self-assessment tax return?

Individuals who are self employed (a sole trader) or a partner in a partnership

Any untaxed income such as,

Money from renting a property

Tips and commission

Income from savings, investments and dividends

Foreign income

Child benefit, if you or your partner have income over £50,000

If your only income comes from your weekly, monthly wages and as been taxed at source, you do not need to complete a self-assessment return.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

What are the self-assessment deadlines?

If you do need to compete a return, you must notify HMRC in the second year of business and no later than 5th October.

Completion of paper self-assessment                      31st October (following the end of the tax year)

Completion of self-assessment online                     31st January (following the end of the year)

1st Instalment of tax due                                              31st July

2nd instalment of tax due                                             31st January

The tax year is from 6th April to 5th April each year.

Once you have completed your tax return, there will be an estimate to pay for this year’s tax liability. This is based on your last return. If you can demonstrate that the tax liability will be less or more, you can notify HMRC to change the amounts due. Late returns automatically have a £100 fine, if later than 3 months, they will charge interest.

What do I need to do?

You must keep all bank statements, cheque stubs, receipts, expense forms and invoices. HMRC may need to investigate your return and review and check that you are paying the correct amount of tax. Self employed businesses need to keep records for 5 years after the submission deadline (ie 31 January).

You can keep your records digitally, physically or part of a software programme. You can use a simple spreadsheet to record all your data, have software that can scan your receipts and keep them safe. Always remember to back your data and keep your records secure. Remember that HMRC may penalise you if they are not correct, complete or readable, so find a method that works for you and your business.

What can I claim?

To claim an expense, it must pass the wholly and exclusive for your business.  Expenses that have incurred relating to your business. If an expense has a dual purpose (that is the cost paid out is for personal and business), the cost that can be charged to the business is the business cost only.  For example, you have a mobile phone, that 50% of the time you use for business, your monthly cost is £50, therefore you can only claim £25 on your business expenses. That is, 50% of £50. HMRC have set up some simplified expenses, this is to make it less complicated for business to calculate the costs. You should however compare the two, to ensure you have chosen the correct method. There are two types of accounting methods, cash basis and accounting. If you need further information on this, please do not hesitate to contact us.

EXPENSES

OFFICE SUPPLIES – paper, pens, envelopes, stamps, printing

ADVERTISING COSTS – logo, websites, business cards, adverts online/paper, network events etc

TRAVEL COSTS – train, taxi, plane etc. But if it is a journey that is to and from home and your normal place of work, this cannot be claimed. All expenses must be reasonable, you can’t take a plane journey for business and then have a personal holiday afterwards. You can’t take small taxi rides, which would be deemed unacceptable by HMRC.

TRAINING AND SUBSCRIPTIONS – you can claim the costs on training if it enhances your skills. Any training relating to income you currently receive is allowable. Training for new skills and therefore new income is not allowable. There are subscriptions which are allowable and approved under HMRC, these are the only ones allowable.

LEGAL AND ACCOUNTANCY FEES – you can claim any expenses that relate to the business.

SUBSISTENCE – meals and drinks needed while away on a business. This cannot include entertainment. The subsistence must be a reasonable cost.

VEHICLE COSTS

FLAT RATE SCHEME. These rates are:

Up to 10,000 miles                                         45p a mile

Over 10,000 miles                                          20p a mile

Motorcycles                                                      24p a mile

Bicycles                                                               20p a mile                                                             

You must be a record of your mileage, a simplified spreadsheet can be performed for this task.

ACTUAL COSTS, but if necessary, must be apportioned for business use only.

Vehicle Insurance

Repairs and servicing

Fuel

Breakdown cover

Vehicle  – capital allowances

CHARITABLE DONATIONS –

WORKING FROM HOME –

FLAT RATE SCHEME (Simplified) Where you look at the average number of hours per month you spend running your business from home. The amount you claim depends on the hours, the rates are as follows:

25-50 hours – £10 per month

51-100 hours – £18 per month

101 hours or more – £26 per month

ACTUAL COSTS

You can claim the actual running costs of your home. How much you can claim depends on the amount of time and space you use in your business. You will need to apportion your costs in a fair and reasonable basis. One method is work out is to find out how much time you spend in the house for your business and what rooms you use for your business. This will then be compared with how many rooms you have. For example, you have 8 rooms in your house, you use 1 room for your business, that room is used 75% for business. Add all your costs that you can claim and multiply is by 1/8 and then multiply again by 75%.

A List of home office costs:-

Mortgage interest only

Rent

Broadband

Insurance

Council tax

Light and heat

Water

Repairs and maintenance (this must relate to the space being used for the business and must not be something that would seem personal in nature (updating your kitchen for example)

PLANT AND MACHINERY – printers, computers, equipment software etc. Depending on what accounting method you have used, traditional accounting would be claimed via capital allowances. Otherwise full amount claimed in the year.

ACCOMMODATION – you can claim accommodation if you need to be away for business, the cost must be reasonable and you cannot claim for any personal holiday time while away.

EYE TESTS – you can claim for your eye test, if it is related to spending a reasonable amount of time in front of a screen. You can claim for glasses if you can prove that it is needed for business work (ie using the computer screen) and not for personal.

ENTERTAINMENT – you cannot claim any entertainment

For more information, please check on the HMRC link below.

https://www.gov.uk/expenses-if-youre-self-employed

https://www.gov.uk/expenses-if-youre-self-employed

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