It’s that time of year again as the deadline for self-assessment is looming. For those filing paper returns, the deadline is very close- 31st of October but those submitting online returns have a bit longer, until January 31st, 2022. Self-assessment can be arduous, time-consuming, and stressful, so it’s not surprising that many people put it off until the last minute. However, there are ways in which to approach this task in order to make the process easier and less stressful.
What is Self-Assessment?
When you are employed, taxes are automatically deducted from your wages. However, those who are self-employed will have to actively pay any tax that they may owe to HMRC- this process is called self-assessment.
There are many other instances in which people will have to file a tax return, outside of the standard self-employed scenario. For example, if you are employed and self-employed at the same time. Another example is if you earn over £100,000 over the last tax year as an employee or pensioner. If you think you may need to complete a tax return, visit the official HMRC website, which has a wealth of information and guidance.
Registering
If you are recently self-employed or your circumstances have changed, it may be your first time completing a tax return. The process of registering for self-assessment can be completed online, via the HMRC website. However, HMRC will have to send specific details to you through the post before you can complete registration. This involves receiving your Unique Taxpayer Reference (UTR) and then your activation code. Considering this process can take up to 20 working days, it’s extremely important that you leave enough time between registration and the self-assessment deadline. If you miss your deadline, you could face penalties, including fines.
Evidence
One of the more time-consuming aspects of self-assessment is the collection of relevant evidence. This can include evidence of income such as invoices or receipts. You also need to collect evidence to support any expenses that you may claim against your tax- which can include everything from rent and mortgage payments to equipment and fuel.
The idea of assembling all of this evidence can be daunting and that’s why it’s best to create a system. Throughout the year, any physical or digital receipts, invoices or statements should be filed away, either into a physical folder or a digital folder, or better yet, both. This way all of this information is ready and waiting when it comes around to tax season, making the process so much easier and faster.
Timing
Let’s be honest, very few people look forward to self-assessment. A consequence of this is that many of us leave this task until the last minute. This is understandable but can often lead to rushing your tax return and potentially making mistakes. Also, by leaving so much to the end, you may not have the time to collect evidence, make the relevant calculations or contact HMRC. All of these hurdles could lead to you missing the deadline, leading to penalties or even potential investigations.
The best way to combat this problem is by changing your relationship with self-assessment- adopting a proactive approach. Instead of leaving it till the very last minute, start your taxes earlier in to the year, giving yourself a much-needed buffer should you need it. Also, by completing self-assessment earlier, you’ll also avoid that feeling of dread hanging over you throughout the year, reducing stress and worry.
Help
Self-assessment can be extremely complicated, particularly for those who are newly self-employed. Fortunately, there are so many resources available for those who are struggling. HMRC themselves provide comprehensive information which guides users throughout the entire process.
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