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If you’ve just started out on the road of self-employment or you’re doing additional work alongside your main job, then before you know it you’ll need to start thinking about your Self Assessment.
If you’ve never had to complete one, your first time could be a bit stressful, but don’t worry - we’re here to demystify the process.
If you’re unsure whether or not you need to complete a Self Assessment then, as a general rule, anyone who receives income that isn’t taxed at source needs to complete a Self Assessment. If you’re a sole trader, in a business partnership, or a company director, you must file a return. If you receive a notice for Self Assessment from HMRC you’re legally obliged to complete it. There are a number of other reasons why you may need to complete a Self Assessment, you can find out more in our article, “Do I have to complete a Self Assessment tax return?”.
Be aware that the Self Assessment process has seen significant updates for the 2023-2024 tax year. It's crucial to stay informed about these changes to ensure accurate reporting and compliance.
What is a Self Assessment?
Every year millions of people in the UK have to complete a Self Assessment by the 31st January each year. This involves completing a Self Assessment (or Form SA100) and is usually done online, though it’s still possible to file in the old fashioned way with a paper form.
Self Assessment is HMRC’s way of finding out how much Income Tax and National Insurance you need to pay. Employees have their Income Tax deducted automatically from their employment income through the PAYE system – this doesn’t happen for self-employed workers, or for some other types of income, such as dividends, pensions or income from savings and investments, which is where the Self Assessment comes in.
HMRC will use the information you provide to calculate how much Income Tax and National Insurance you’re required to pay.
Note: Starting from the 2023-2024 tax year, a notable change is introduced for businesses whose accounting year-end doesn't align with the tax year-end. This may require apportioning profits from more than one set of accounts, especially for the transition year.
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How to register for Self Assessment
To complete your Self Assessment online, you first need to register with HMRC to tell them you need to file a tax return. You can register either online at the GOV.UK site, by phone, or by post (by completing form SA1 - PDF download here – and sending it to HMRC). To register, you’ll need your National Insurance number and your personal and business details (if applicable).
Do I need to complete a Self Assessment?
As a general rule, Self Assessments are for anyone who receives income that isn’t taxed at source. In the case of a sole trader, the income you receive through your invoices doesn’t have National Insurance contributions or Income Tax subtracted from it, so you must tell HMRC about that income on your Self Assessment so they can calculate what tax, if any, you owe.
Other examples of income not taxed at source can include rental income from any property you may own, income from abroad, or investment (dividend) income.
If you’re the director of a limited company, you must complete a Self Assessment. GOV.UK also has an online tool that tells you if you need to file a return.
We have an article that gives the full rundown on completing your Self Assessment.
What if I’m just doing a bit of work on the side?
If you're freelancing on the side, the new tax year basis changes starting from 6 April 2023 are particularly relevant. Ensure you understand how this may impact the reporting of your side income on your Self Assessment, especially if you have varied income streams.
Many choose to keep this under wraps from their employer. However, while you may not want your boss to know about your other work, you can’t hide it from the taxman, so you’ll need to register as self-employed.
You’ll need to complete a Self Assessment so that the taxman knows exactly how much extra income you’ve earned, and how much tax you need to pay on top of your monthly PAYE tax.
Hopefully, those who started contracting, freelancing or became self-employed before the beginning of the last tax year (6th April 2022) will already be up to speed for the looming Self Assessment deadline on 31st January 2023, but for those who are new to the game, here’s the important information you’ll need to prepare.
Registering with HMRC
You’ll need to register with HMRC to tell them you need to submit a Self Assessment tax return. You must register by 5th October after the end of the tax year where you are required to file a tax return – for example, if you need to file for the 2022/23 tax year, you should register by 5th October 2023. If you miss this deadline, you may have to pay a penalty. The deadline for online filing, and payment of any tax due is the 31st January after the end of the tax year.
When registering with HMRC for Self Assessment, it’s important to note the new tax year basis commencing from 6 April 2023. This affects how profits are reported, especially if your business's accounting year-end differs from the tax year-end. For the 2023-2024 tax year, you might need to apportion profits from more than one set of accounts.
If you miss the registration deadline, you may face a penalty. However, if you can prove to HMRC that you had valid reasons for not registering in time, and you still manage to submit your Self Assessment and pay any tax due by the 31st January deadline, these penalties can be reduced or even removed entirely. Your accountant can help you with the appeals process.
You can register online, by post or by phone – always make sure you give yourself enough time in case anything goes wrong. To register, you’ll need your:
- National Insurance number
- Personal and business details.
After you’ve registered, HMRC will send you a Unique Taxpayer Reference (UTR) number in the post. You use your UTR to register for HMRC Online Services. HMRC will then send you a PIN number in the post to access Online Services where you can file your Self Assessment. This arduous process should become simpler when HMRC rolls out online tax services, but for now, you’re reliant on Royal Mail and HMRC to get registered.
Once you’re registered, you won’t need to re-register in the future. You’ll get a yearly reminder to file your Self Assessment until you tell HMRC that you no longer need to file, perhaps because you’re returning to full-time employment or moved abroad, for example.
What will I get when I register?
Your reward for registering for Self Assessment will be a Unique Taxpayer Reference Number (or UTR Number). This is a ten-digit number that HMRC allocates to those who must complete a Self Assessment to help streamline the process. You’ll only have one UTR (much like a National Insurance Number), so if you’ve previously registered for Self Assessment you don’t need to get a new one. After you’ve registered for Self Assessment, HMRC will send your UTR in the post. You’ll need it to submit subsequent Self Assessments, so keep it safe and don’t lose it!
The benefits of filing your Self Assessment online
We strongly recommend that you do register for online filing, that you give yourself plenty of time before the deadline, and that you also complete and file your Self Assessment online using the online service (or get an accountant to do it for you online).
The main benefits of filing online are:
- The deadline for online Self Assessment is later – paper returns must be submitted by October 31st while the deadline for online submissions is January 31st for each tax year
- Online tax returns are immediately acknowledged by HMRC so there’s no worry about your Self Assessment return getting lost in the post
- The tax and National Insurance contributions you owe are automatically calculated for you by HMRC, and you can adjust payments
- You can easily save or print a copy for your records
- You can check your account at any time to see what tax you owe and any previous tax payments you’ve made.
Do I have to register every year?
Nope - once you’re registered, you’ll be reminded to submit a Self Assessment every year until you inform HMRC you no longer need to complete one. This could be because you return to full-time employment, move abroad etc. Bear in mind that if you inform HMRC you no longer need to complete a Self Assessment, but further down the road end up in a situation where you need to start filing personal tax again, you’ll have to re-register and get a new UTR.
Keeping records
One of the most important things you’ll need to do to file an accurate Self Assessment is to keep comprehensive records. Being diligent and keeping proper financial records can seem rather tedious, but it’ll all be worth it when you come to complete your Self Assessment.
When you come to submit your financial information through the Self Assessment Online portal, or via your advisor, having an organised stack of paperwork (or better yet an online accounting system) can save you heaps of time and stress.
Before you start, here’s a small selection of the financial records you should have to hand when you go to complete your Self Assessment. Many of these may not apply, depending on the complexities of your finances, and this is not an exhaustive list (just a selection of the most common items).
The sorts of things you’ll need to keep records of include:
Income from employment (Salary)
Your employer (even if it’s your own limited company) must provide you with a P60 Form at the end of the tax year. You should use the information on the P60 to record the income from your employment and the tax you paid in the year on your Self Assessment.
Self-employment income
If you’re a sole trader, you need to declare your income from self-employment minus your allowable business related expenses. Ideally,you’ll want these in a spreadsheet, or better still a nifty online accounting system.
Dividends
If you’re running your own limited company and are paid dividends, you need to declare these dividends on your Self Assessment. You’ll need all the vouchers for dividends issued in the relevant tax year. If you have shares in any other company that issued you with a dividend, you’ll need the relevant dividend certificates - these could be paper or online.
Partnership income
Details of any income you received through a Partnership
Interest from savings or investments
You’ll need to gather all the relevant information on the interest you’ve received from banks or building societies. You’ll need to contact them directly for all the relevant statements you don’t already have.
Rental income
Own rental property? You’ll need details of all the income you’ve made through it in the previous tax year. If you want to claim any allowable expenses related to the property, you’ll need to provide records of what you spent. This can be a complex area, so make sure you seek support from an accountant where necessary.
Foreign income
Receiving any income from overseas? Keep the details handy.
Pension contributions
If you pay into a pension, you should keep details of all the payments you’ve made.
Pension income
If you received any pension income, you’ll need the records to prove it - usually, your pension company will provide you with a P60 form with this information.
Gift Aid you wish to claim (on charitable donations)
If you’ve given anything to charity and you want to claim Gift Aid on it, these details will be needed too.
Payment on account
A payment on account is an advance payment towards your tax bill. If this is your first Self Assessment then you’re unlikely to have made any. When you complete a Self Assessment HMRC will let you know how much you need to pay including any payment on account. The deadline for these payments are 31st January and 31st July each year.
Redundancy lump payment or unemployment benefit
If you left a full-time job or claimed unemployment benefit (such as Jobseeker’s Allowance) in the last tax year, HMRC needs to know about it. You should have been given a P45 form or a P60 form from the benefit provider or employer.
P11D form
A P11D form is used to inform HMRC about any taxable benefits provided by your employer, such as a company car or private medical insurance. If you received any taxable benefits from any employer in the relevant tax year, they should have provided you with a P11D form detailing them and you’ll need this in order to complete your Self Assessment.
Capital Gains
If you’ve made any profits disposing of things like property or shares, you’ll need to have these details handy too. You may be liable for Capital Gains Tax.
If in doubt, speak to a specialist
If you have a complicated financial setup, it can be well worth paying a specialist to complete your Self Assessment. Here are some signs it might be time to find yourself a good accountant:
- If any of the terms listed above gave you a headache
- If you think you have some of the above, but you’re not sure
- If you’re not sure which of the above relates to income and which to expenses and allowances
- You’re unsure of the tax law for specific items.
If you’re ever in doubt about what you need to keep a record of, it’s better to err on the side of caution. Of course, the easiest way to know is to talk to a specialist and ask them for some advice. At Crunch, our easy-to-use online accounting software and unlimited support from expert accountants makes keeping on top of Self Assessments and your business finances simple.
The early bird catches the worm (and avoids penalties)
The mega-organised amongst you will be asking the question - when is the earliest I can submit my Self Assessment?
The short answer is the beginning of the new tax year - 6th April. However, to successfully complete your Self Assessment, you’ll need all the various tax forms from the previous year (P60, P45 and P11D, for example), and depending on the speed of your accountant or employer, these may not arrive for several weeks or months. So, in practical terms, the earliest you can submit your Self Assessment is whenever you have all the necessary paperwork.
If you do miss the deadline to file, we have a ‘what happens if I miss the deadline?’ article that will explain what you can do.
Why would I file early?
There are a number of advantages to filing your Self Assessment as early as you can. From a financial planning point of view, you’ll know how much tax you owe earlier, allowing you to budget effectively.
The deadline for paying owed tax is also 31st January, so having some time to plan for this expense is obviously preferable to submitting your Self Assessment on the deadline, finding you owe thousands and having to pay it out of pocket (or worse still, not being able to pay and incurring fines and penalties!).
On the flip side, if you’ve overpaid tax when submitting your Self Assessment early, you’ll be at the front of the line when HMRC starts issuing refunds. Read our article for ‘seven good reasons to file your Self Assessment early’.
How much income tax will I pay?
Income tax for the self-employed is calculated on profits plus any other income, so you’ll have to pay for any earnings that exceed the personal allowance on your total income. If you’re working on the side or in multiple jobs, then HMRC will want to know your income from self-employment profits – the amount left over after all business expenses have been deducted from your self-employment income.
Remember, your self-employment profits could push your total earnings into a higher tax band, which means you’ll have to pay more tax.
You can find all the tax rates and thresholds for the current and previous year in our handy article. We also have our free and easy-to-use Crunch Income Tax Calculator that you can use to calculate what your tax bill is likely to be.
Don’t forget that if you had any business expenses from your self-employed work these can be offset against your income from self-employment, reducing your tax bill. We’ve got all the information you need on claiming business expenses, either as a sole trader or through a limited company.
If you’re an employee, the amount of tax you pay on your income through employment will be worked out by your employer through their PAYE system, so you only have to worry about paying the remaining tax owed through your self-employment profits or any other untaxed income you may receive, such as income from property or some types of investments.
It sounds complicated, and it can be, but HMRC will lend a hand with some of the calculations. You simply enter the amount you were paid in the tax year, which you can find on your P60, as well as the amount you’ve earned through your self-employed work, and HMRC will tell you how much you owe.
But wait, what about National Insurance?
It’s never that simple! While the National Insurance you pay on any income from employment is taken care of in your PAYE calculations by your employer, if you’re self-employed (or both employed and self-employed) then you’ll have to pay self-employed National Insurance on your self-employed profits. The amounts will be calculated by HMRC through your Self Assessment and must be paid by 31st January each year along with any Income Tax you owe.
How much should I put aside for my Self Assessment tax bill?
As a sole trader, it’s good practice to save around 30% of all of your self-employed earnings each month. We explain this more in our article “How do I pay myself as a sole trader“. You may need to put aside more if your profits are really high (say above £60,000). If you set up your business as a limited company then you may find you could pay less in tax. Here’s some information on whether being a sole trader or a limited company is the best option for you.
You may not actually have to pay 30% of your self-employed income, but it’s a good benchmark to ensure you’re covered when it comes to paying the tax you owe. We’ve seen far too many people find themselves in trouble when they don’t have enough cash to pay their tax bill.
One last thing to remember that catches a lot of people out is that as well as paying your tax from the previous tax year you’ll also need to pay half of your expected tax bill for the next tax year. You’ll then also need to make another payment on account on 31st July. You can find out more in our article “What is a payment on account and do I have to pay it?”.
Completing your Self Assessment
The time has finally come. You’ve registered for Self Assessment online, you’ve collected and organised all the relevant paperwork, and you’ve decided on the best time to file.
Note: As you prepare for your Self Assessment, be mindful of the new changes effective from the 2023-2024 tax year. If your business's accounting period doesn't align with the tax year, you’ll need to adjust your reporting accordingly.
This includes potentially using Overlap Relief to adjust transition profits, which will then be spread over the following years up to 2027-2028.
First times
If you’ve never filed a Self Assessment online before, you’ll need to create an account with HMRC Online Services. To register you’ll need your Unique Taxpayer Reference number, and either your postcode or your National Insurance Number. Once registered, HMRC will send you an Activation Code. This will be sent in the post to your home address. Use this code to activate your Online Services account within 28 days, or you’ll have to restart the process and request another one. Once you’ve activated your Online Services account, you’ll have a User ID and password. You can use these to log in to HMRC Online Services.
How do I fill out my Self Assessment tax return?
Now comes the fun part. You’ve registered with HMRC, you’ve got all your logins and passwords, and you know roughly how much tax you owe and you’ve got enough cash to cover it. The exact amount you will have to pay on your profits from self-employment will be worked out using an annual Self Assessment tax return, which can be filled out online at Gov.uk.
We would always recommend filing your tax return as early as possible. This can be done anytime after the start of the new tax year, so long as you’ve registered and received your Unique Taxpayer Reference (UTR) code and log in details from HMRC. Leaving it to the last minute could result in a stressful festive season, and filing late will incur fines.
Once you’ve logged into the system, the process is not actually that daunting – so long as you’ve kept accurate records, which include all sales invoices and expense receipts. Essentially you’re just filling out a form and the system does the calculations for you. Essentially you’re just filling out a form and the system does the calculations for you. The best way to get ready for your Self Assessment is to use software (such as our amazing free Crunch software) to make it really easy to keep on top of your bookkeeping.
Self Assessment veterans
If you’ve previously filed your Self Assessment online, you’ll already have a User ID and password for HMRC Online Service. You can log into HMRC Online Services and get started.
Let’s get filing!
If you’ve done all your preparatory work, completing your Self Assessment online isn’t actually a particularly arduous task. It basically amounts to transposing data from your financial records into HMRC’s system. You’re just filling in an online form. The easiest and safest way to complete your Self Assessment is to start by entering all the information you have into a spreadsheet - that way you can easily see the totals for each individual category.
Take your time
HMRC’s system can save your progress for you, meaning you don’t necessarily have to complete your Self Assessment in one sitting. If there’s an item you’re unsure about you can go away, read up on it or consult an expert, then come back to make sure it’s done properly. Similarly, you can go back to edit previous sections before you finally submit your Self Assessment – so if you make a mistake, it’s not the end of the world.
Help is at hand
The Online Services Self Assessment system is full of helpful hints while completing your return. In many cases, the section you are filling in will tell you exactly where to look to find the information you need. Each field also has a little help tooltip next to it with more information. If you’re really confused, or you want to save yourself some time, then perhaps you may prefer to use a qualified accountant like Crunch to check and submit your return for you.
Double-check and submit
It’s in everyone’s interest that your Self Assessment is accurate, so HMRC gives you every opportunity to make sure your information is correct, and highlight any errors they spot for you. Once you’ve finished every section, you can review your tax return and finally, when you’re ready, file it.
Then what? How to pay your Self Assessment tax bill.
After you’ve double-checked that all the information you’ve entered is correct, press submit and breathe. HMRC will tell you how much tax you owe and you then hand over the cash, usually via Direct Debit or bank transfer (the full list of how you can pay is on the Gov.uk website). One last thing to remember is that since January 2018 it’s no longer possible to use a personal credit card to pay your Self Assessment tax bill. It's also no longer possible to pay your personal tax bill at a Post Office.
Struggling to pay your Self Assessment bill
If you are struggling to pay your tax bill which is less than £30,000, HMRC offers a “Time-to-pay” arrangement for any tax owed. If you need further time to pay we explain your options further in our article on late payment fees and fines.
Missing the deadline
If you miss the deadline (midnight on January 31st), you’ll be hit with an on-the spot £100 fine. After this initial penalty, you’ll have three months to file your Self Assessment. You’ll also face interest charges on any tax you owe. You’ll have to pay more in fines if you don’t sort out your Self Assessment as soon as possible.
This same fine will be applied after twelve months, too. If a year should go by and HMRC have yet to receive your Self Assessment, you’ll have accrued a minimum of around £1,600 in fines, not to mention interest on any tax you owe.
HMRC also has additional powers to punish those they believe are intentionally withholding information from them or attempting to conceal their true tax liabilities, including a fine of up to 100% of their tax liabilities in addition to the penalties above. So, the moral of the story is: do not delay.
HMRC claim their penalty regime is designed to encourage submission rather than generate income through fines – however you look at it, everyone benefits from an accurate and on-time Self Assessment.
Note: Taxes change depending on your individual circumstances. For more personalised advice and to speak to one of our finance professionals, give us a call on 033 3311 8000.
Want someone to handle it for you?
We offer a Self Assessment service where our Chartered Certified accountants will handle, complete, check, and file your tax return to HMRC on your behalf. You can put your feet up and let our team handle the work, ensuring that your tax information is correct, and that any tax you owe or are due back in a refund is correct. Check out our Self Assessment service and let us handle the work.
