The amount owed to HMRC by late taxpayers continues to rise, year on year. The first of the self-assessment tax deadlines is looming, with 31 October being the cut-off for HMRC to receive paper or hard copies of your filing. For those who file their self-assessments online, although you have till 31 January 2020, time is running out to get your paperwork in order. Are you ready to submit your self-assessment tax form?
For many of us, seeing a letter drop through the letterbox bearing HMRC’s logo may send shivers down our spine. Very rarely will you hear from the taxman because he owes you money, rather, it is more likely you are due to provide data, pay a tax bill or worst case scenario, have a penalty for late filings.
Small business owners have been reported to be the fastest growing group of people who are penalised or in debt in to the taxman due to late filings of self-assessment tax returns.
What tax do I pay as a small business owner?
Depending on the type of business you run, there may be a number of types of tax you need to pay. These are some of the most common:
- Income tax through your Self Assessment
- Corporation Tax, if you operate through a limited liability structure
- VAT, if your turnover threshold is over £85,000
Do I need to file a self-assessment tax return form?
According to HMRC, you are responsible for filing a Self Assessment tax return in the following circumstances:
- you have the final say in how the business is run i.e. you are the founder or one of the founders of the business
- you are responsible for meeting losses as well as profits
- you can hire someone on your own terms to work for you
- you decide what work to do, how you do it and where to provide the services
- you regularly work for other people
- you complete unsatisfactory work in your own time and at your own expense
There are different rules if you work through an agency, if you’re a company director or if you’re the secretary of a club or holder of another office, but most sole traders will be responsible to pay tax to HMRC via a self-assessment tax return and directors of limited companies who have income outwith their business and pay themselves a salary.
If you’re unsure about your employment status, check out the guide on HMRC’s website.
How does the Self Assessment process work for small businesses?
Once you have determined whether or not you need to register for Self Assessment and file a tax return, the process is largely the same whether you’re a freelancer, contractor, sole trader or limited company director.
Registering for Self Assessment
To register for Self Assessment, you need to visit the gov.uk registration page and submit your details. If your business is run as a limited company or a limited liability partnerhsip, the process is slightly different and you will need to register here.
Registering for Self Assessment should also give you a Government Gateway user ID, which you can then use to set up your personal tax account and manage different elements of your tax affairs online.
Once you’re registered for Self Assessment you’re then able to file your tax return. You do this by filling out the Self Assessment tax return form either online or on paper. However, the government’s Making Tax Digital initiative may mean small businesses can no longer file paper tax returns in future.
Deadlines for submission to avoid penalties
The deadline for submission for self-assessment tax returns is 31 October 2019 for paper or hard copies and 31 January 2019 for online submissions. Therefore, for the 2018-19 tax year, which ended in April 2019, the deadline for paper tax returns is 31 October 2019 and the deadline for online tax returns is 31 January 2020.
After submitting your tax return, you will be advised of the tax due to HMRC. The deadline f or paying tax due in a given tax year is the same same date as the final date for online Self Assessment tax returns, so the deadline for paying your 2018-19 tax is 31 January 2020.
As there are fines for late payment of tax due, we strongly recommend you prepare and submit your self-assessment tax return as early as possible so you have time to pay without, hopefully, incurring any late penalty fees from HMRC. so it’s a good idea to prepare for your tax bill as best you can.
How to fill in your Self Assessment tax return
When it comes to completing the self-assessment tax return, you should keep a record of all your income and expenses for the tax year in question.
As a cloud accounting practice, we offer access to cloud accounting software to support small business owners in collating all their financial data in one place, without having to spend needless amounts of time gathering paperwork every year. The process is streamlined and instant so all data is collected in one place on the cloud when it is time to file your tax return.
The government’s Making Tax Digital initiative also means that when the government rolls out all areas of tax collection digitally, you are well prepared and already operating and organising you financial transactions digitally, a much more efficient method than excel sheets and receipts!
You’ll also need a UTR (unique taxpayer reference) number if you want to file a self-assessment tax return. You can complete a simple online form on the HMRC website to get your own unique UTR number.
What are allowable expenses for small businesses?
When you’re self-employed, there are a number of costs you can claim back against your Self Assessment tax bill, so long as they’re allowable expenses.
We have a wealth of online resources looking at the allowable expenses you can claim for to help reduce your tax bill.
Examples include travel costs, office costs, including working from home, costs of business locations, financial costs such as insurance or bank charges and advertising and marketing costs, such as website building or employing the help of a digital marketing agency.
Southside Accounting can help
If you are a small business owner looking for support to grow and stabilise your costs and increase cash flow, Southside Accounting can help, providing accounting services and sole trader services in Wimbledon.
Southside Accounting are your local cloud accountants in Wimbledon and London. We’re local, like you. And we’re a dynamic small business. Just like you.
We are fully chartered, certified accountants so we’re well qualified to be the trusted advisers you need to help make your company a success.
All our clients are on the cloud and have access and support on cloud accounting software, in both QuickBooks and Xero.
Our fixed fee structure means there are no surprises. And our smart Service Plans are tailored to meet the particular demands of your business.
Call us to book a free no-obligation meeting today.
We always offer an initial free face to face meeting with prospective clients, so we can get to know you and your business and understand your unique circumstances and business goals.
Written by Shaima Todd.