Growing your business
Intuit QuickBooks Small Business Index, February 2024
TAX AND PENSIONS
How to do a Self Assessment Tax Return
Whether you’re completing your Self Assessment tax return for the first time or the fourteenth, it can be daunting. As a beginner to Self Assessment, how are you meant to know what you’re doing? What if you make a mistake? These are the questions we all ask ourselves when completing a Self Assessment form.
More than 10 million tax returns are submitted to HM Revenue and Customs (HMRC) each year. But nearly one in five (19%) of those who have filed a Self Assessment in the past two years think they may have lost out financially because they made an error or didn’t understand the document. That’s a scary statistic for first timers, but whilst the Self Assessment process can be confusing and overwhelming, we’re here to make it as simple as possible. Our guide breaks down every step of the Self Assessment process, with practical tips, advice and examples to take you all the way through to the submission of your tax return.
What we’ll cover:
Glossary
Employed: working for an employer who deducts income tax and national insurance contributions from your salary. They may also provide benefits including paid leave and pension contributions.
Self-employed: individuals who work for themselves and are responsible for managing their own taxes. They must report their income and expenses to HM Revenue and Customs (HMRC) and pay taxes accordingly.
Self Assessment: the system by which individuals, including self-employed and those with other sources of income, use to report their earnings and calculate their tax liability.
Income Tax: tax on an individual's income. It is collected by HMRC and is based on a person's earnings, including wages, self-employment income, rental income, and other sources of income.
National Insurance: a mandatory contribution scheme that funds certain state benefits, such as the State Pension and healthcare services. Both employees and self-employed individuals make National Insurance contributions.
Capital Gains Tax: a tax on the profit made when you sell an asset that has increased in value. It applies to assets like property, investments, and certain personal possessions.
Child Benefits: payments made by the government to support families with children. They are typically paid to the parent or guardian responsible for the child's care.
Trust: a legal arrangement that allows assets to be held and managed for the benefit of specific individuals, known as beneficiaries. Trustees oversee the management and distribution of these assets.
Freelance: self-employment in which individuals provide services to clients or businesses on a contract basis. Freelancers are generally not considered to be employees and are responsible for their own taxes.
State Pension: a regular payment provided by the government to individuals who have reached the eligible age. It serves as a form of retirement income.
Registered Pension Scheme: a tax-efficient savings plan designed to help individuals save for their retirement. Contributions to such schemes receive tax benefits.
Payments on Account (advance payment): advance payments of Income Tax and National Insurance made by self-employed individuals toward their annual tax bill. These payments help spread the tax liability over the year.
Accounting Period: the timeframe over which a person or business calculates their financial results and tax liability. It is often one year, but it can be different for various entities.
Limited Company: a business structure where the liability of the company's owners (shareholders) is limited to the amount of their investment. It is a distinct legal entity.
Non-resident Company: a business incorporated outside the UK that does not have its central management and control within the UK. Non-resident companies may have different tax obligations.
UTR Number (Unique Taxpayer Reference): a unique 10-digit identifier assigned by HMRC to individuals and entities for tax purposes. It is used to track tax-related transactions and obligations.
Deductible Expense: legitimate costs that can be subtracted from your total income to reduce your taxable income. These expenses can include business-related costs, such as office supplies or travel expenses.
Tax Credit: a financial incentive offered by the government to reduce the amount of tax an individual owes. Tax credits can be based on various criteria, such as income, family status, or specific expenses.
What is a Self Assessment tax return?
If you’re self-employed, you’ve probably already started receiving emails from HMRC reminding you to fill out your Self Assessment tax return before the online deadline of 31 January.
But what exactly is a Self Assessment tax return? A Self Assessment tax return is one method HMRC uses to collect Income Tax and National Insurance in the UK.
“In the simplest terms, Self Assessment means what it says: you assess your earnings and expenses yourself before sending what you owe directly to HMRC.”
If you are an employee, tax is usually deducted automatically from your wages, pensions and savings. If you are self-employed however, you need to report it yourself in a Self Assessment tax return. This also applies to those who receive additional income through freelance work, or a side hustle, even if you are also employed.
Who needs to complete a Self Assessment tax return?
Self Assessment is necessary for those who are self-employed, high earners and those with complex financial affairs.
If you are self-employed, then you don’t have an employer to deduct taxes from your income. You must therefore do this yourself via Self Assessment to ensure you pay the correct level of Income Tax and National Insurance. There are also instances where you may need to complete a Self Assessment, even if you are employed.
Those with complex financial affairs such as investments, income from abroad, trust funds, fluctuating levels of income, freelance income or rental properties may also need to complete a Self Assessment to ensure all income sources are accurately accounted for.
Examples of when you need to complete a UK Self Assessment tax return include when you:
Earn self-employment income over £1,000
Run a small business
Are a registered sole trader
Earned more than £1,000 in a given tax year in your capacity as a corporate partner
Are employed but earn over £100,000 a year
Have a rental income over £2,500 (Check directly with HMRC if this income is between £1,000 and £2,500)
Earn untaxed income over £2,500 (Check directly with HMRC if this income is between £1,000 and £2,500)
Need to pay Capital Gains Tax
Have a high income and are claiming Child Benefit
Are a trustee of a trust or registered pension scheme
Have State Pension as the only income over the personal allowance
Receive a P800 from HMRC stating that you didn't pay enough tax last year
If you are the director of a limited company, you may also need to complete a Self Assessment, depending on how you receive your income, and whether you are already taxed through PAYE.
Check if you need to complete a Self Assessment tax return
Filling in a Self Assessment tax return is also an option if you wish to make voluntary Class 2 National Insurance contributions. Doing so can enable you to meet the criteria for benefits like the State Pension.
What do you need to complete a Self Assessment tax return?
When completing your Self Assessment, the first stage is to gather all the necessary documents and information. Some of the documents you will need include:
Income statements
Receipts
Expenses
Invoices
Payslips
Bank statements
Rental income (for Landlords)
Transportation logs (if you have company vehicles)
Any other relevant financial records
Should you ever have to answer HMRC questions about your tax return, all of this information will prove that you have taken steps to ensure your tax return is accurate.
You will need to input all of your key financial information in order for HMRC to calculate the tax chargeable on your earnings. As well as supplying details about your income, you may need to include other financial information such as:
Charitable donations that are eligible for tax relief
Your P60 information
Your 10-digit Unique Taxpayer Reference
Your National Insurance number
Records of any expenses related to self-employment
Details about your untaxed income from self-employment, dividends and interest on shares
To make things easier, make sure you get hold of this information in good time rather than waiting until the end of January to dig it out.
Self Assessment deadlines
The key deadlines to be aware of if you complete a Self Assessment are:
End of tax year | 5th April |
Start of new tax year | 6th April |
Deadline to register for Self Assessment | 5th October |
Deadline to submit a paper tax return | Midnight 31st October |
Deadline to submit online tax return | Midnight 31st January |
Deadline for payment | Midnight 31st January |
Other deadlines you may need to be aware of include:
Deadline for payments on account | 31st July | This applies if you make advance payments towards your tax bill |
Deadline for amending tax return if provisional figures are used | 12 months from the Self Assessment deadline | If your ‘accounting period’ ends at a different time to the end of the tax year, your ‘accounting period’ is different to your ‘basis period’ or you’re waiting for a valuation you may not know your total profit for the year and will need to use provisional figures in your tax return. You must declare this on your tax return and submit the actual figures no later than 12 months from the Self Assessment deadline, paying any additional tax due (plus interest from the date of payment). If you have overpaid on tax, you will have interest paid back to you. |
Deadline if you want HMRC to automatically collect tax you owe from your wages and pension | 30th December | |
Deadline if you’re a trustee of a registered pension scheme or a non-resident company | 31st January | You must complete a paper tax return, you are not able to submit a tax return online |
Deadline for partnership returns if you have a limited company as a partner | 12 months from the accounting date for online returns, or 9 months from the accounting date for paper returns | This only applies if your partnerships accounting date is between 1st February and 5th April |
Make sure to make a note of important deadlines, and set up reminders if necessary, to avoid penalties.
Read our blog on how to prepare for the key Self Assessment deadlines.
How to register for Self Assessment if you are self-employed
The easiest way to register for Self Assessment is online, however you can also register by post if you are not able to access the online service.
Registering for Self Assessment online
Set up or sign into your Government Gateway account
You will be able to register for Self Assessment and Class 2 National Insurance through the online portal
You will then receive a 10-digit Unique Taxpayer Reference (UTR) number by post within 15 working days (use this number in all correspondence and on your tax return)
If you have registered for Self Assessment before, but did not send a tax return the previous year, you will need to reactivate your account.
Reactivating your online account
Sign into your Government Gateway account
Complete form CWF1 for Self Assessment and Class 2 National Insurance.
You will need your UTR number to reactivate your account. Can’t remember? Find your UTR number.
Registering for Self Assessment by post
Fill in the following LC form online
Print out the form
Post to HMRC (address: Self Assessment, HM Revenue and Customs, BX9 1AS)
You will receive your Unique Taxpayer Reference (UTR) number by post within 15 working days
If you are not self-employed but need to complete a Self Assessment tax return, you should complete the SA1 form and submit online, or post to HMRC.
If you are a partner or partnership, and need to register for Self Assessment, use the SA401 form.
You can also deregister from Self Assessment via your online account or by writing to the HMRC.
Understanding income sources
Now that you have registered for Self Assessment, you might think you are ready to complete your form. However, it is a good idea to ensure you understand all of your income sources first to make completing your tax return as simple as possible.
To avoid mistakes, you should categorise your different income sources for accurate reporting to ensure you comply with tax regulations.
Possible income sources include:
Employment income
Self-employment income
Rental income
Investment income
Foreign income
Consult the Government website for income tax regulations for different income sources.
Deductible expenses
A deductible expense is any cost you can legally deduct from your total profit, in order to reduce the amount of tax you pay. They are often also known as allowable expenses.
The costs you can deduct from your total profit will depend on the source of income. This is why it is important to categorise any income sources and expenses before completing your tax return.
Employment income
For employment income, allowable expenses are generally quite limited. You are able to claim expenses on any costs incurred for your job that your employer does not reimburse you for. This may be work-related travel costs, equipment and costs incurred due to working from home. See what you could claim back as an employee
Self-employment income
For self-employment income, you can claim back a wide range of business-related expenses. These include:
Costs for business premises (rent/utilities etc)
Employee wages
Business travel
Marketing and advertising costs
Business insurance
Equipment costs
In order to be able to legally deduct expenses, they must be wholly and exclusively incurred for business purposes only.
See what expenses you could claim if you’re self-employed
Rental income
If you need to declare rental income on your Self Assessment tax return you may be able to deduct expenses such as:
Maintenance costs
Letting agent fees
Insurance costs
Council tax
Advertising for tenants
You cannot deduct any costs associated with the property purchase, such as mortgage payments.
Check the Government website for allowable expenses on rental income.
Investment income
For any income generated through investments, you are generally not able to claim any allowable expenses.
Foreign income
On foreign income, the rules around deductible expenses are similar to that of self-employed income. You can typically deduct any costs incurred exclusively and wholly for the purpose of your business. Rules can however vary based on tax treaties and local regulations so make sure to check beforehand.
Tax credits
Tax credits are financial benefits provided by the Government to eligible individuals, in order to reduce tax liability. This is not the same as a deductible expense, which reduces your taxable income. They are designed to assist those with lower financial incomes.
If you are a small business owner, you could be eligible for tax credits including:
Working Tax Credit
Child Tax Credit
Universal Credit
Pension Credit
To find out what tax credits you could claim, visit the Government website.
Make sure to do your research around allowable expenses and tax credits. Doing so could make your tax bill smaller and enhance your tax efficiency.
How is Self Assessment calculated?
Your tax liability is calculated based on the reported income and deductions.
Under the Self Assessment system, UK taxpayers calculate their own tax liability. To do this, you will have to factor in income tax, NI contributions, student loan repayments and any other relevant expenditures or gains.
The exact figures that will contribute to the calculation for Self Assessment can vary, and depend largely on which deductions you’ll need to make.
When completing your Self Assessment, it is vital to double check any calculations made to ensure accuracy. Failure to do this could result in errors and financial penalties. The best way to protect yourself from this is to keep good documentation and bookkeeping practices.
To help with calculating income tax, you can also use our handy Income Tax Calculator.
To calculate your tax liability
Add up all income sources
Subtract any allowable expenses
Apply tax reliefs, allowances and credits
Determine which tax bands your income falls into and calculate the tax due for each band
Calculate National Insurance contributions based on earnings
Calculate any other required taxes (e.g. Capital Gains or Inheritance Tax)
Let’s look at a simple example:
Self Assessment tax return example
For this example, imagine you are self-employed with income from 2 separate sources. You are a business owner, but you also own property which you rent out to generate additional income.
First of all, you need to add up all of your income sources.
Rental income = £10,000 Sole trader business income = £100,000
Total = £110,000
Next, you need to subtract any allowable expenses to get your total taxable income.
Rental income allowable expenses = £2,000 Sole trader business income allowable expenses = £10,000 Rental income - allowable expenses = £8,000 Business income - allowable expenses = £90,000 Total taxable income = £98,000
Finally, calculate tax due based on relevant tax bands
Total taxable income: £90,000 (from business) + £8,000 (from rental) = £98,000
Based on the current tax rates and allowances, the tax calculation would be:
Total taxable income (£98,000) - personal allowance £12,570) = £85,430
Basic tax rate (20%) on income between £12,571 and £50,270 (Applies to £37,700) = £7,540
Higher tax rate (40%) on income between £50,271 and £125,140 (Applies to £47,730) = £19,092
Total tax due: £7,540 + £19,092 = £26,632
In addition to income tax, you may also owe National Insurance contributions (NICs), student loan repayments and Capital Gains tax if applicable. These would need to be factored into the calculation as well.
Please note: this is just a simplified example, and the real calculation may be a lot more complicated depending on the individual circumstances of the person submitting the return.
Completing your Self Assessment form
Now that you have gathered all of the necessary information, categorised your income sources and understand what expenses you are able to legally deduct, you are ready to complete your Self Assessment tax return.
The main tax return form is the SA100, however you may have to fill in supplementary pages based on your financial situation.
The SA100 covers:
Personal details
Taxed and untaxed income
Pension contributions
Charitable donations
State pension
Child benefits
If you are self-employed
You will also need to fill in form SA103. There is a long and short version of this form. For most people the short version will suffice. However, if you are a sole trader with a more complex financial situation, you may be required to complete the full version (SA103F).
The SA103 form requires you to provide details of business income and expenses, profits and tax allowances.
Other common supplementary pages include:
SA105 - for those with rental and property income
SA106 - to report on foreign income
SA104 - for business partnerships
SA102 - for employees or company directors
SA108 - to record Capital Gains and losses
With each supplementary page, you need to report income from these sources that you haven’t paid tax on. You also need to declare any allowable expenses, which will be deducted from your tax bill.
For example, if you’re filling in the self-employed form (SA103), you need to report your turnover under the business income section and any expenses. If you received a self-employed income support grant, you need to declare it under the ‘Other tax adjustments for your business trading name’ section.
Meanwhile, for the SA105, landlords need to enter their income from rented properties in two separate sections and can claim expenses for rates, insurance, ground rent, repairs, loan interest, and other professional fees.
And, for the capital gains (SA108) form, you need to declare ‘disposal proceeds’ for residential and non-residential properties, and shares and securities. You can claim for ‘allowable costs’ such as the price paid to buy the asset and costs of any improvements.
Taxpayers submit the forms together as a full Self Assessment tax return.
Filing your Self Assessment tax return (step by step)
The process of doing a UK Self Assessment tax return can seem convoluted, but it’s quite straightforward if you break it down into steps.
Login to your Government Gateway account
Select the required Self Assessment forms, including any supplementary pages
Complete with the necessary information
Submit online
If you do not have a Government Gateway account, or cannot access online services you need to call HMRC to request paper versions of the required forms. You can then post these to HMRC instead of submitting online.
Whichever filing method you use, this will mean reporting all of your income and expenses and calculating how much tax you owe. With the help of our Self Assessment calculator, this process has never been easier.
It is important to make sure you complete and submit your tax return before the required deadline to avoid penalties.
Can you amend your Self Assessment form after filing?
You’ve submitted your return and you realise you’ve made a mistake - can you amend your tax return after the deadline? Yes. You are able to make changes to it up to 12 months after the deadline. You can do this online or by sending another paper return. If you are making amends online, you must wait at least 3 days before submitting an updated version.
Please note that making changes to your tax return may change the amount of tax you need to pay.
If you need to make changes to another tax year, you can write to the HMRC.
Paying your Self Assessment bill
Once you’ve submitted your return, you’ll be told how much tax and National Insurance you need to pay. It’s worth making sure these add up. Keeping good financial records throughout the year can help with this.
When it comes time to pay, you can do this via:
Debit card
Corporate credit card
Bank transfer
In person at the bank
The final payment you need to make is due on the 31st January.
Can’t make your final payment by 31 January? If needed, you can set up a Time to Pay Arrangement with HMRC. See the Government website for more information.
Help may also be available from voluntary sector organisations, such as the tax charities: TaxAid or Tax Help for Older People. The first time you submit a self-employed tax return, you are requiredhave to pay any tax due from the previous tax year, as well as half of the tax you expect to pay in the current tax year. So, effectively you pay 150% of the tax. You’ll then make a second payment on account by 31 July. Once you are in the payment on account system you’ll only have to make the January and July payments.
What are Self Assessment payments on account?
Put simply, Self Assessment payments on account are advance payments made towards your tax bill. This includes Class 4 National Insurance for self-employed individuals. Payments on account are made each year, and are usually submitted by midnight on 31 January and 31 July.
Payments on account usually represent half of the previous year's tax bill. However, you may be exempt from this payment if your last tax bill was less than £1,000, or you paid over 80% of the previous year's tax through other means.
Once you have settled your payment on account, you must make a ‘balancing payment’ if you still have any remaining tax to pay. This must be done by midnight on 31 January.
After making the payments on account, if you still have tax to pay, you must make a "balancing payment" by midnight on 31 January of the following year. These payments do not include capital gains or student loans if you are self-employed. You can check and request to reduce your payments on account through your online HMRC account.
Common Self Assessment mistakes to avoid
Completing your Self Assessment tax return can be nerve-wracking, especially if you’ve never done it before. You might be worried that you make a mistake that ends up costing you more money than necessary.
Use our handy checklist to make sure you don’t fall foul of common Self Assessment mistakes. Common Self Assessment mistakes and how to avoid them include:
Mistake | Tips to avoid |
Missing the deadline | Set reminders for key deadlines. |
Providing incorrect information | Keep good financial records throughout the year and gather all necessary information before starting your tax return. |
Not properly categorising income sources and expenses | Make a note of all your income sources and expenses before starting your tax return and double check which category they fall into. |
Forgetting to subtract allowable expenses | Make a note of all allowable expenses and follow our step by step calculation to make sure you have subtracted them correctly. Double check your workings. Seek professional advice if you are unsure. |
Not claiming eligible tax credits and deductions | Research which tax credits and deductions you are eligible for, before completing your tax return. Make a note of these and subtract using our step by step calculation instructions. Seek professional advice if you are unsure. |
Failure to report all income | Don’t be tempted to leave out additional income sources, no matter how small. Failure to report all income could result in penalties. Include all income when you are categorising your income sources. |
Incorrect National Insurance Contributions | Double check you have calculated NICs based on the correct rate. Seek professional advice if you are unsure. |
Underestimating Payments on Account | Familiarise yourself with the thresholds for Payments on Account, keep good financial records throughout the year and seek professional advice if you are unsure. |
You can also keep track of your Self Assessment tax returns is by logging into your official Government Self Assessment account. Here, you can see what you have already paid, how much you owe, and key deadlines.
And remember, if you do make a mistake, you can amend your tax return up to 12 months after the deadline.
Using online tools and software
The key to stress-free tax returns is organisation. Utilising bookkeeping software can help to streamline your financial record keeping so that you have everything you need to complete your Self Assessment tax return.
You can simplify the process using features such as income and expense tracking, automated invoicing, bill management and more, all within the QuickBooks app.
Our accounting software is simple and easy to use, so even the least tech-savvy can work with ease. We also offer a range of Getting Started guides to help you use QuickBooks like a professional.
We also have a range of pricing options and plans to suit any budget and business type.
So, whether your financial situation is straightforward or more complex, QuickBooks can help to simplify the tax process, helping to give you financial clarity.
Do you need an accountant for Self Assessment?
Filing Self Assessment tax returns is not always an easy task, and as such you may need to rely on some help to get the job done. Rest assured, millions of people in the UK complete Self Assessment tax returns each year. There is plenty of guidance and expertise out there should you need help.
Getting professional help can reduce the likelihood of mistakes and make the process a little less overwhelming.
Find a chartered accountant near you
QuickBooks’ software has also been designed with collaboration in mind, so you and your accountant can work together to make the process efficient and pain-free. Seamlessly share data and information for the most up to date and accurate financial reporting.
Staying organised for future returns
Staying organised is key to easing the process for future tax returns.
You’ll thank yourself when it comes round to Self Assessment if you’ve maintained good record-keeping habits throughout the year.
You need to make sure that you keep hold of relevant financial documents, receipts and invoices to provide as evidence for your tax return. To make this easier, and avoid large stacks of paper, utilise accounting software to store all the necessary data.
By staying organised, you can spend more time focusing on growing your business, and let QuickBooks accounting software take care of organising your financial data for tax season.
When should you begin your Self Assessment tax return?
Don’t let the Self Assessment deadline creep up on you. The sooner you start your return the better.
Self Assessment is a year-round job. To be in a good position for the deadline, register for Self Assessment now if you haven’t done so already, and make sure you are storing all of your client invoices, business-related receipts and bank statements safely.
How long do you need to keep your Self Assessment tax records for?
For those who are self-employed, or declaring property income, you will need to keep your updated records for five years following the filing deadline. If your income comes from other sources, you only need to keep your records for 22 months. That is, if you file them on time - if the returns are filed late you’ll need to keep them even longer.
Helpful resources
The world of UK tax law might seem like a minefield. You might be wondering how you are supposed to navigate Self Assessment without a law or accounting degree.
We’re here to reassure you that this is not the case.
You can find all of the information you need to file your Self Assessment on the Government Hub.
HMRC also has some helpful resources on the different types of tax returns you’ll need to fill out, and when you may be exempt. Explore their range of Self Assessment forms and helpsheets.
They also have a series of YouTube videos and webinars for you to utilise, as well as a dedicated HMRC Community Forum and Self Assessment helpline, where users can reach out to find a solution to their specific problems.
So there you have it, now you should know everything you need to know to complete your Self Assessment tax return. By following our tips and advice, you can say goodbye to tax stress.
And remember, when it comes to Self Assessment, accuracy is key.
Make sure to:
Practise good bookkeeping habits all year round
Get ahead and start your tax return as early as possible
Watch out for key deadlines
Double check your tax return for common mistakes
Keep up to date with the latest tax information
For even more information on Self Assessment, why not check out the QuickBooks blog?
Feel you’re better informed about first time Self Assessment tax returns? The QuickBooks blog covers a wide range of business-related topics – it’s all part of our mission to help small businesses grow. Stay compliant with QuickBooks
Share:
