The Paper Tax Self-Assessment Tax Return – What you need to know.
Here our Insiders Affiliate Simple Tax share essential advice…
The paper return deadline is this month, 31st October, therefore we thought it would be useful to invite Mike Parkes from GoSimpleTax to explain how best to prepare for the Self-Assessment tax return submission and file with confidence.
New comers to submitting Self-Assessment tax returns, should know it pays to know that there are three ways of filing. Firstly, you can submit via the HMRC site and receive instant acknowledgement post-submission. You can also use commercial software to do this for you. Or, you can send a paper tax return to HMRC in the post.
Whichever method you choose, it’s important to understand your exact responsibility. For those who are self-employed sole traders or Landlords letting out UK property, paper submissions can be complicated as they involve additional forms and documentation.
1. Be conscious of the deadline
Should you choose to file a paper tax return, don’t forget to file before the 31st October deadline. We would recommend sending your paper submission prior to the October deadline, either through recorded delivery or with some proof of posting in order to prove your compliancy.
If you miss the deadline for submitting your paper return, don’t be tempted to file it late – you have until 31st January to complete one online. Just don’t submit both. You will be charged penalties from the 1st February for any late submissions.
2. Organise supplementary pages
Remember, it isn’t enough to submit the main SA100 tax return. You need to bundle it together with the rest of your documentation that references your property or self-employment income.
For any income as a landlord, all that’s required is to file an additional form (SA105) and submit it alongside your regular Self-Assessment tax return.
However, with self-employment, the additional sections required of you could be either the SA103S or the SA103F. The difference between the two is that the former is for those who had an annual turnover below the VAT threshold for the tax year (£85,000 as of 2019/20), and the latter is for those who earn above the VAT threshold.
3. Be open to online and prepare for Making Tax Digital for Income Tax
While you may have historically always submitted your tax return by paper, the vast majority of tax returns are now submitted online. Improvements in technology and the extra three months to file are the main incentives to submit an online tax return.
Having an online account with HMRC allows you to not only extend your filing deadline but also check your details at any time to see how much tax is due and act accordingly.
If you’re happy to tweak the way in which you keep your records and adopt digital record-keeping, this will help minimise admin further, as well as enable you to submit your tax returns and automatically calculate your tax.
Going forward as of April 2023 you will have to file your self-assessment digitally to HMRC providing updates every quarter via your digital platform.
Preparation is key, adopt the right approach now it could save both time and money, make the move to digital ahead of the deadline for MTD for Income Tax.
About GoSimpleTax
GoSimpleTax software submits directly to HMRC and is the solution for self-employed sole traders and anyone with income outside of PAYE to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.
Insider members receive a 10% discount off GoSimpleTax, simply register to trial the software and your discount code will be emailed to you. Not joined the Insiders yet? Join here.
Trial the software today for free – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.
A Guide To Record-Keeping And Expenses For Self-Employed Sole Traders
Whether you’re new or not to self-employment, record-keeping might sound like hard work. And while that may be true, it does come with its own reward – namely, that sole traders can claim back allowable expenses and pay less tax on their earnings.
HMRC has a number of rules about record-keeping though. Mostly, they relate to the storage of receipts and other documentation after you’ve filed your Self Assessment tax return for that tax year. By not adhering to them, you run the risk of losing out on any tax relief – or worse, being penalised by HMRC.
So, to ensure you get the tax-saving benefit of expenses, we’ve asked Mike Parkes from GoSimpleTax to set the record straight on record-keeping and provide guidance on how to claim.
What expenses can sole traders claim for?
There’s a whole host of expenses you can claim as a sole trader, and they can potentially net you big savings if you utilise all that are available to you. Generally, people are aware that equipment purchases qualify as expenses, but there are many others.
They include:
Travel and accommodation
As a sole trader you may have to cross up and down the country for long stints at a time, basing yourself near a site far from home. Luckily, HMRC considers hotel stays viable expenditure. The accommodation records (how long you’ve booked) should be as close as possible to the proposed timescale of the project you’re there to oversee.
You can also claim tax relief on mileage or travel bookings made over the year, as well as meals on overnight trips. To ensure you stay within the bounds of eligible allowances, it’s worth consulting the gov.uk website.
Legal and financial costs
- If you need to hire an accountant to support you in your venture, you can claim on their total costs. This may also be the case for any other professional services you may need for business purposes. Likewise, you can claim against bank costs such as overdraft and credit card charges. Costs like professional indemnity insurance premiums and lease payments can be claimed back, although there are rules if you’re using cash basis accounting.
Marketing costs
As you are using these services purely for the purpose of driving your business forward, HMRC will permit marketing exercises as eligible expenses. That’s great news for sole traders who use flyers to drum up work, for example, or need a website that advertises their services.
Clothing Expense
While you operate as a self-employed individual, you may also represent certain authorities when you’re caring for patients or vulnerable people. As a result, you may be expected to purchase a uniform or your own PPE.
Fortunately, you’re able to claim for it as an allowable business expense. Provided that what you’re purchasing is either a uniform or necessary protective clothing needed for your work, you’ll qualify for tax relief.
What’s more, if you need to purchase any additional PPE for your role (say, gloves and face masks), this is also considered an allowable expense.
Rent for premises
If you rent a space purely for business purposes, then that too can be classed as an allowable expense.
Utilities
If you work from home, you’re entitled to claim a proportion of your gas, electric, water, broadband and telephone bills as allowable expenses. There’s no exact science to this, but generally you’d divide the bill by the number of rooms in your house and then divide that figure based on the amount of time you work from home. The GOV.UK website has a good example. If that sounds too complex, then you can claim simplified expenses.
Subscriptions
If your freelance work requires you to pay a membership fee or would benefit from you purchasing a trade publication, these costs can be claimed back on. However, this does not extend to political party subscriptions.
These are just some of the examples of expenditure that you can claim on, but they highlight the wealth of opportunities available to all sole traders – provided they keep the relevant records. Claiming these expenses through your Self Assessment tax return helps to further reduce your tax liability and maximise your take-home pay.
Over on the Insiders we share their in depth advice on what records to keep, how long you must keep them for, how you should store this information and what HMRC would want from you if they launched an investigation. Essential knowledge for every business owner.
About GoSimpleTax
GoSimpleTax software submits directly to HMRC and is the solution for freelancers and the self-employed alike to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.
Trial the software today for free – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.
INsiders members receive a 15% discount – to get your discount code simply sign-up to try our software above and it will be emailed to you.
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Self Assessment: Should You Defer Your Second Payment On Account?
Our latest affiliate is Go Simple Tax who are offering our mastermind group (The Insiders – learn more here) a 10% discount on all of their packages. They will also be writing for us so together we can help you stay up to date on what you need to do….
For those that are new to the Self Assessment tax return process, payments on account are one of the most common stumbling blocks. Despite being introduced as an initiative to help taxpayers spread their tax payments, it often results in annual frustration and can actually harm your cash flow if you’re caught unaware.
That’s why, in response to the COVID-19 pandemic, HMRC announced that they would allow taxpayers to defer their second payment on account (that would have normally been due on 31st July 2020). It is hoped that this gives taxpayers the chance to prepare. But is that the right course of action? We’ve brought in Mike Parkes from GoSimpleTax to set the record straight.
What is a payment on account?
Payments on account are advance payments towards your next tax bill. They’re calculated based on the amount that you paid the previous year.
HMRC splits this amount into two, and places the deadline for payment six months apart from one another. For the 2019/20 tax year, the first was due by midnight on 31st January 2020, and the second would normally be made by midnight on the 31st July 2020.
This latter payment is what can now be deferred, as long as it is eventually paid by the 31st January 2021.
If you had a £5,000 tax bill for the 2018/19 tax year, for instance, you would need to make two £2,500 payments on account towards your 2019/20 tax bill.
But if your 2018/19 Self Assessment bill was less than £1,000 or if over 80% was deducted at source (such as employment), then you will not need to make a payment on account – you would simply need to pay any outstanding tax by the 31st January.
What are your options?
If you are required to make payments on account, you will still need to pay your second one. Although, as HMRC has offered taxpayers the opportunity to delay this, you can choose to make your second payment as late as the 31st January 2021, alongside the submission of your Self Assessment tax return.
HMRC will not charge any interest or penalties should you choose to do this. However, by delaying your second payment to January, you do run the risk of having to fulfil all your tax responsibilities at once. This could result in you having insufficient funds in place to cover all your tax liabilities.
Your therefore have three options:
Pay in accordance with the original July deadline
If you can afford to pay your tax bill as you would do normally, you should do. If anything, it creates a sense of ‘business as usual’ in an otherwise tumultuous time.
I appreciate that, for many, paying in July will harm their cash flow. However, it is my view that clearing debt where possible is more sustainable and allows January to mark the start of a new financial year – and a fresh start.
Reassess and reduce liability
If you’re doubtful that you can afford a second payment on account right now, calculate your 2019/20 tax liability before the 31st July 2020. This will confirm the actual amount to be paid in July 2020, January 2021 and July 2021, and give you clarity. To do this, you need to file your 2019/20 Self Assessment tax return early.
Filing early won’t mean that you have to pay your tax bill early, after all – but it does allow you to determine what your total tax bill will be ahead of time. From here, you can consider two key points:
- Does the July 2020 payment on account need to be deferred?
- Do the January 2021 and July 2021 payments on account (for the 2020/21 tax year) need reducing to reflect the impact that COVID-19 has had on them?
Defer to later in the year
Of course, there will be some cases that are unable or unwilling to pay anything towards their tax bill in July now that they can defer. In this instance, it’s important that they are reminded of the Self Assessment late penalties should they wish to push this all the way back to 31st January and be unable to make payment at that time.
Deferring could have an impact on cash flow in 2020/21. If you are also VAT-registered and have deferred your VAT payment, then it is worth noting that this also needs to be paid by 31st March 2021.
Ultimately, it falls to you to make the decision that best suits you. However, it is my view that, by planning your 2021/22 payments now, you will be in a much safer position.
About GoSimpleTax
With GoSimpleTax, business owners can get a clear picture of their obligations. All your income can be logged in an easy-to-understand format, and their software will highlight areas where you can potentially reduce your tax liability through tax relief.
Register for their free trial today and stay abreast of all the latest tax changes. When you’re ready to file your Self Assessment tax return, upgrade to their full service and submit straight to HMRC.