If you are self-employed as a sole trader and have earned more than £1,000 in the relevant tax year before deducting any tax reliefs, you must submit a self-assessment tax return.
In this guide, we’ll take you through everything you need to know about filing your first self-assessment tax return, including when you need to do it, why submitting it early is beneficial, and whether you need an accountant to help you.
When Do You Need to File a Tax Return?
You must register for self-assessment with HM Revenue & Customs (HMRC) before 5th October after the end of the relevant tax year in which you became liable. For instance, the deadline for the 2022/23 tax year is 5th October 2024. Your self-assessment tax return must be filed by 31st January of the following year, and this is also the deadline for paying the tax you owe. For example, the deadline for the 2022/23 tax year is 31st January 2024.
Do You Need an Accountant to File a Tax Return?
While it is not mandatory to use an accountant to file your self-assessment tax return, it can be a daunting task for first-time filers. Therefore, hiring an accountant can provide you with peace of mind knowing that everything is done correctly, and all the required information is submitted to the government. An accountant can also help you claim all the expenses you’re entitled to and maximise tax savings.
The Documents Your Accountant Needs to See
If you decide to use an accountant, you’ll need to provide them with various information to complete your tax return. For example, you’ll need to provide details of your self-employment income, employment income, dividends, rental income, private pensions, bank interest, and any other income or gains.
Software to Keep Your Accounts in Order
Using technology can help you cut back on the bureaucracy that comes with administrative tasks. Tools like Dext make it easy to instantly send receipts and other paperwork to your accountant. Additionally, accounting software such as Xero and QuickBooks allows you to give access to your accountant, enabling them to check your records and complete your tax return accurately.
Why You Should File Your Tax Return Early
As a business owner, filing your tax return early can provide you with numerous benefits, such as avoiding errors, steering clear of penalties, boosting cash flow planning, and receiving tax refunds earlier.
Avoid Errors
Rushing your tax return to meet the 31st January deadline can lead to errors. You need to ensure you have enough time to give your accountant all the information they need to complete your tax return accurately. Submitting your return at the last minute could mean missing out on opportunities to reduce your tax bill by not claiming all the reliefs you’re entitled to.
Steer Clear of Penalties
Leaving your tax return until the last minute could result in missing the filing deadline, leading to an initial £100 filing penalty. If your tax return becomes more than three months late, you’ll receive £10 daily penalties up to a maximum of £900. A penalty of the higher of £300 or 5% of your tax due is then charged if your return is six months late and again if it’s over 12 months late.
Boost Cash Flow Planning
Filing early can be beneficial for your cash flow management. Knowing exactly how much tax is due in January allows you to plan for how to pay it. First-time tax return filers are often surprised by the need for ‘payments on account,’ which are advance payments for your tax bill. Filing early means you can ensure you’re able to pay them or have time to set up a payment plan with HMRC if you can’t settle the bill in full.
Receive Tax Refunds Earlier
Filing your tax return early can also ensure you receive any tax refunds due to you promptly. Reasons for tax refunds include excessive payments on account based on the previous year’s income and HMRC making errors with tax codes. The sooner you file your tax return, the sooner you’ll receive any refund owed to you.
Southside Support
Filing your first self-assessment tax return as a sole trader can seem daunting, but with the right approach and help, it can be a straightforward process. Using an accountant, keeping your accounts in order with technology, and filing early can all make a significant difference to the accuracy, efficiency, and ease of filing your tax return. Remember, if you need support, Southside Accountants Wimbledon is available to help you navigate the process with ease.
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