Firstly, Self Assessment was introduced by the Inland Revenue (HMRC) in April 1996. Secondly, this tax system used to assess and collect Income and Capital Gains Tax.
This vlog looks at How to prepare your tax return 21-22
Some important things to think about for your personal tax return
Do I need to do a Tax Return?
You need to complete a tax return if,
- You’re self-employed, a higher rate taxpayer
- Get one done if you’re a company director with more than just a company salary
- We are not yet finished, get one done if you want to claim losses
- Finally, do a return if you’ve sold stuff like shares or investment property
Self Assessment Return
Let’s have a look a look at what makes up your Personal Tax Return. There are two parts to the Self Assessment return.
The part everyone has to complete is the core section
There’s the extra (supplementary) pages.
Self Assessment Return: Core Section
This is where you provide personal details, for example
- Tax Reference UTR
- Date of birth
- Details of savings income, pension payments and gift aid claims
Self Assessment Return: Supplementary Pages
This covers typically information regarding sources of income and capital gains. For example, details on
- Employment income
- Business partnerships
- UK property income
- Foreign income or gains
- Capital gains
- Non-UK residents or dual residents
- For example, where you have employment income, the information will be from P60s, P11Ds, P45s
- Where you are self-employed, your accounts will be the start point of working out taxable income
- Property investors, your rental accounts will be your information source
Self Employed: What can be claimed?
Where you are self-employed, tax is based on business profits. This isn’t the same as money in the bank
To clarify, the general rule is that any costs claimed must be for business purposes only. Wages (not drawings) office rent, and accounting fees are good example. A trip to a Spa may be needed, but it is not a business cost.
What you can claim normally gets a reply of ‘well, that depends’. The cost of normal clothing, that trendy jumper is no good. However, stick a logo on it and it can become work wear and claimable.
Shared expenses are where costs are a mix of personal & business. Mobile phones and computers for example. However, HMRC allows you to claim the bit that relates to your business. It’s typically between 0% and 100%.
Where your business is below the VAT limit you can claim certain expenses using scale rates, known as the simplified regime.
This simplified regime only applies to sole traders and partnerships.
Two main areas that the simplified regime applies to is
• Working at home
The rates allowed for use of a car or a van is 45p per each business mile traveled, up to the first 10,000, and then 25p per mile thereafter
If you use a motorbike or motorcycle, then you can claim 24p per business mile traveled.
Where you use a bike, claim 20p per business mile traveled.
The mileage rates cover the costs of fuel, insurance, repairs at your mate Daves body shop, and the cost of the car.
Working at home
The scale rates are based on the number of hours we work at home.
For example, if you work on average 25-50 hours per month then you can claim £10 per calendar month, if we work in excess of 101 hours at home, the rate goes up to £26 per month
Working at home covers you working on, and in your business. Watching movie clips doesn’t strictly speaking cover this, unless you’re a videographer.
Scale rates v actual costs
Which one is better for you? Well do the numbers and see what’s better for you.
Most importantly, the devil is in the detail. For example, claim mileage rates for using you can’t switch to actual costs the following year. You change method when you sell the car
Firstly, the date by which you have to send in your Tax Returns is vital. If you need to complete a tax return for 2021-22, then you need to register with HMRC by the 5th of October in your businesses second tax year.
Paper tax returns are still allowed. These must be submitted by midnight 31st October 2022 At the time of writing, that date has gone, so you must submit your personal tax return online. If there are religious reasons not use the Internet, then paper is still allowed.
The deadline for filing online tax returns is midnight 31st January 2023. It’s also the date by which HMRC want your money.
The money owed for 2021-22 will be any tax that you owe for 2021-22, and possibly payments on account. Check out our FREE online business and tax calculators to give you a heads up
Payments on Account
A payment on account, let’s call then installments, is money up front. It’s an installment payment towards next year’s tax bill. A payment on account is due if you owe more than £1,000. There are two payments on account due, the first by 31st Jan 2023, the second by 31st July 2023.
The installments are 50% of the tax owing. If you owe £2,000 for 2021-22 then that’s two payments of £1,000 due.
You can make a claim to reduce them. If your income is likely to be less in 2022-23, then reduce the installments.
Money owed and PAYE
If you owe less than £3,000, and you have income from a job then you can have it collected under PAYE. The tax is collected by amending your tax code.
Moreover, think of this as an interest free HMRC loan. Any tax owing will be collected via your weekly or monthly salary. Make sure your tax return is sent in by the 30th December 2022.
If you cannot pay your tax bill in full
You may not have the funds to pay your tax on time.
What to do if the money isn’t there? Above all, don’t delay in sending in your tax return.
Most importantly, get your tax return in first. Figure out what you can pay, and when, and then contact HMRC to discuss support available.
HMRC may suggest you pay what you owe in installments. This is called a Time to Pay arrangement.
Pay what you owe in instalments (Time to Pay)
If you cannot pay a Self Assessment tax bill
You can make your own Time to Pay arrangement using your Government Gateway account, if you:
- have filed your latest tax return
- owe less than £30,000
- are within 60 days of the payment deadline
- plan to pay your debt off within the next 12 months or less
If you cannot make your own Time to Pay arrangement online
Call the Self Assessment helpline if you cannot make your own Time to Pay Arrangement online, for example you owe more than £30,000 or need longer to pay.
If you’ve done your tax returns then excellent, relax. If you haven’t done your tax returns, relax, and get it sorted soon after.
However, if it feels too daunting, you need to recover from the festivities, or you are time poor, then contact us to see where we can help.
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