Top Tips for Self Assessment
It's that time of year again and everyone is (or should be) keen to get their self assessment tax returns completed and get their hands on a potential rebate. This year so far has been no different to any other in terms of the barriers which our clients have to overcome in order to file their returns. Read on to see our tips for a stress free transaction and how to avoid slowing down the process (and your refund).
Make Sure You Are Registered
A common issue is clients not being set up for self assessment returns. Registering as self employed and registering for self assessment are two different things. If you are newly self employed, you should log onto your tax account and activate the self assessment tax option. HMRC will then send you an activation code which takes 5-7 working days - a delay that you could do without if you are waiting on a potential rebate. Save yourself some time by ensuring this service is active before it is time to file.
Keep ALL Receipts
This is by far the biggest issue we come across with clients and its undoubtedly the most costly. The fact is, if you're using provisional figures you should err on the side of caution. If you over claim your expenses and do not have the receipts to back up those claims, trouble will be at your door in the form of the tax man. A lack of proof could mean you are forced to put in a figure that may actually be below the true expense, to avoid any alarm bells ringing and HMRC asking to see proof. You will also have to disclaim that you have used provisional figures. Our advice to all clients is to keep all receipts - whether you think they are business related or not - and then get some advice on what is allowable expenditure when tax time comes around.
Have Your Income Statement Prepared
If you are registered under the construction industry scheme (CIS) then you should receive monthly statements from your contractor which detail the tax deductions. Be sure to keep them safe and save a copy too, as this info is crucial for obvious reasons. HMRC can access this info directly by looking up your UTR number on their CIS database, so the information should be 100% correct - keeping your statements will make this easy and save you time. Even if you are not CIS registered, you should keep tight records of your income and whether tax has been deducted at source - use a simple spread sheet or software such as Quickbooks to make your life easier.
Allow for NIC Contributions
We get a lot of disappointed groans when we mention national insurance contributions - the oft forgotten burden. NIC class 2 contributions were at £3 a week for 2019-2020 (£3.05 for 2020-2021) and class 4 NIC contributions are 9% on profits between £9,501 and £50,000
2% on profits over £50,000. Expect these amounts to be deducted from any rebate you are owed.
Be Ready to Go
So far this year HMRC have been extremely efficient in processing self assessment tax returns, with most clients receiving refunds in 14 days or under. It goes without saying though that the quicker you file, the quicker the money will come in. As time goes on HMRC become more inundated with tax returns and the process may slow down, leaving you with a longer delay. Tax time is the same every year, so try to get ahead of the game and reap the rewards in your bank account.