It’s that time of the tax year again that many self-employed individuals dread. However, if your business is set up as a sole trader, then there is one important task that you must complete, and that is completing your self-assessment tax return!
All self-employed workers in the UK are required by HMRC to complete their tax returns on a strict deadline, so it’s important that you make sure that you complete your self-assessment in time to meet this deadline!
In the UK a tax return self-assessment is a method used to show HMRC how much a business earned during a set period and from that it is used to calculate how much tax is owed to them. Usually, the deadline for submitting your tax return is usually the 31st of January (except for paper returns). However, with the unprecedented circumstances of COVID 19, and the acknowledged pressures from it, the UK Government have allowed the deadline to be extended until 28th of February without fear of incurring late-filing penalties.
In order to complete a tax return, sole traders and those in business partnerships are required to fill out Form SA100, which looks at the other income, such as property owned, along with money earned through work. However, with this in mind, if you have earned less than £1,000 in the set period, whether from your business or from additional income, you may not need to complete a self-assessment form.
There are two ways to complete your Tax return, the first being online. This allows you to quickly submit your tax return without the hassle or worry of missing essential pages.
The second method is submitting a paper copy through the post. This is the more traditional method as it has been used by businesses since the HMRC’s introduction. However, since the introduction of Make Tax Digital (MTD) you may be required to submit a request for an exception for online submission; more details can be found here on the Gov website.
HRMC is pushing for all submissions to be made online only by 2024.
If you are unsure how to do this, Markel has explained how to fill in a self-assessment tax return and why it is important.
Key things to remember!
- The Tax year runs from 6th April to 5th April the following year.
- The tax on any income earned during that time must be paid by January the following year.
- The tax that you owe must also be paid by midnight on 31st January.
- If you miss the deadline for filing and paying your tax return, you will receive a fine.
- The initial fine for missing the deadline is currently £100, but this will steadily increase if you fail to pay the taxes within three months.
- HMRC extended the deadline to 28th February this year as a consequence of the pandemic. Late fines will not be charged if payment of taxes by this date.
- Interest will be charged on any outstanding tax bills from 1st February.