“I bet you never thought you’d come across an accountant who tells you how you can file your Self Assessment without an accountant," says Elaine Clark who has been a Chartered Accountant for nearly 40 years.
Elaine goes onto explain that:
“The use of technology makes accounting easy and accessible to many uncomplicated small businesses. Getting a business account like Mettle linked to an accounting system, like FreeAgent, which is free with Mettle, makes this so straightforward; perhaps scary at the start but incredibly simple once you give it a go. Certainly, the self-employed single owner business, such as freelancers, creatives, web designers and consultants, with straightforward business transactions should have no problems in keeping their books, doing the accounts and filing tax returns from the figures on the system. You don’t even have to be good at maths as all of the sums are done for you with a system’s dashboard highlighting your key figures pretty much like the dashboard on a car showing you your mileage, fuel, speed and so on. The key thing to remember is that accounting is merely the process of recording the numbers associated with the things that you do in your venture like making a sale or spending money on things you need to operate the business.”
We asked Elaine to give us some top tips when it comes to filing your annual Self Assessment and here’s what she said:
What do you need to file and when
For sole traders, the filing is straightforward being that the annual your Self Assessment each year is due by 31 January following the end of the tax year.
The filing for limited companies is slightly more complicated. They will have to file full accounts and a Corporation Tax Return with HMRC as well as a subset of the full accounts with Companies House. Generally speaking, the accounts are due at Companies House nine months after the end of the accounting period and the Corporation Tax return is due 12 months after the accounting period.
If the owner of the company receives dividends these will need to be reported on their Self Assessment as Dividend Tax may be due. They’ll also need to add their salary to their Self Assessment.
Declare all income
Your Self Assessment is not just limited to recording the profit from your business but is the place where you will record all income regardless of source.
Generally, this will mean any:
Salary or wages received
Profit (income less costs) from any self-employed businesses
Interest on savings although the first £1,000 of interest is tax-free
Dividends received with the first £2,000 free from tax
Rental income less allowable costs
Any other income not recorded elsewhere
Any gains made on the disposal of capital items e.g. a second property
It’s worth remembering that the figures for your Self Assessment will cover the tax year which runs from 6 April each year to the following 5 April. So the tax year referred to as 2021 / 2022 covers the period 6 April 2021 to 5 April 2022. All income received during that period will need to be recorded on the Self Assessment including jobs that you may have left (see your P45 form given when you leave a job) and jobs you still have (see your P60 form which your current employer will give to you after the end of your tax year).
What forms to use
The Self Assessment is made up of the main section and several supplementary pages.
The key forms that you may need will be:
SA102 for recording wages and salaries
SA103 for your self employed income and costs. Use the SA104 if you operate as a partnership
SA105 for any income from properties
SA108 for any capital gains
Other forms do exist and any good software should guide you through which sections to complete based upon your personal circumstances.
These days you don’t generally file paper returns. Instead, you’d complete the forms online either through software or via registering with HMRC and filing it through the GOV.uk website.
Recording your self-employed income
If you are self-employed with a turnover under £85,000 then you only need to record two figures on your Self Assessment. It really is as simple as that! You just record the (total business income and the total business costs). The third figure, the profit (income less costs), is calculated by the return. There’s no need to break your figures down any further than this although you may routinely do so just for your own informational purposes. Make sure you use the SA103S which is the short version of the form specially designed for those with a turnover of less than £85k.
Only business costs
Of course, it is vital to ensure that you only record business costs in your accounting records. The golden rule for costs is that they must have been incurred wholly and exclusively for business. Generally, it’s pretty obvious what business costs are although there are some specific rules for things like mileage and use of home as an office. Rules can be different depending on if you operate as a sole trader or a limited company. So if you are looking at any guidance, do make sure that you are referring to up to date rules for the business structure that you operate under.
Sole trader – the trading allowance
It's worth mentioning the Trading Allowance which applies to those operating as sole traders. This Allowance means that if your turnover from self-employment is less than £1,000 you do not need to tell HMRC. If your turnover is over this amount but costs are negligible then you can claim a flat £1,000 instead of the individual costs. Obviously, you’ll need to keep a tally of all the business costs to establish if you’ve spent less than a grand.
Safe pair of hands
Of course, you may want an accountant to look over your figures, accounts and tax returns at the year-end. Make sure that you find one who will take what you’ve prepared, look over it, tell you if there are any issues and show you what you need to do to avoid the issues going forward. That way you’ll save money both this year and in the future.
About Elaine Clark
Elaine is the Founder of CheapAccounting.co.uk, which provides accountancy services, and TaxBootCamp.co.uk a revolutionary site providing tax courses to startups, freelancers and small business owners. She describes herself as being on a mission to make everyone love accounts as they tell you how much to pay yourself!