If you earn income or capital gains, it is mandatory to pay income tax. For those who are self-employed or receive additional income not automatically taxed through employment, reporting and paying directly to HMRC are obligatory via a self-assessment tax return, which can be submitted online or by mailing a paper tax return.
Preparing and submitting your self-assessment tax return can be a time-consuming and intricate task. If done independently, it might be intimidating. Hiring specialists like Forest Bookkeeping not only eases the stress but also ensures expert assistance in minimising your tax liability.
With the deadline looming in less than two months, prompt action is crucial, regardless of the chosen approach.
Obtain an Online Account and UTR Number
To file self-assessment tax returns, secure a unique taxpayer reference (UTR) number. Applying for a UTR number promptly is essential. To be safe, submit your application at least a month before the deadline, as it takes ten days for the UTR number to arrive by mail. Activation and receipt of the activation code may take an additional ten days.
Gather Essential Information and Relevant Documents
As the tax year concludes, begin collecting necessary documents to streamline the paperwork-intensive tax filing process. Key documents include annual pension statements, receipts for business expenses, interest earned, gift aid payments, P60, P11D, P45 (if applicable), records of rental income, dividends from investments, and other income.
Understand Which Taxes Apply
Different earnings require payment of various taxes, such as National Insurance, income tax, dividends, and capital gains tax. Maintain detailed records of each income source and calculate the corresponding tax.
Ensure Eligibility for Appropriate Tax Relief
Manage costs effectively by determining eligibility for tax reliefs. These reliefs, such as reduced taxes for business expenses or contributions to pensions, can significantly reduce your tax bill. Some reliefs are automatic, while others require application.
Comprehend Payments on Account
HMRC may require two payments during the year to distribute your tax liability. The first, due on January 31, settles the previous tax year’s bill and initiates the first payment on account for the next tax year. A subsequent payment on account is due on July 31. Exceptions apply for bills below £1,000 or if over 80% of owed taxes have already been paid.
Be Aware of Deadlines, Penalties, and Fines
Timely submission is crucial to avoid fines and penalties from HMRC. Failure to submit by the deadline attracts a £100 fine with added interest on the tax bill. Penalties can be appealed with a reasonable excuse, but notifying HMRC of the intention to submit late is advisable.
For assistance with your self-assessment tax return, contact Sean at 01933 213223 or email sean@forestbookkeeping.co.uk.
