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A Guide to Self Assessment

Posted 2 February 2017

Running your own business comes with a number of advantages including potential tax benefits, limited liability status if you have a company and most importantly, the sense of control and freedom when it comes to managing your finances, time and space.

However, you also need to fulfil your responsibilities to HM Revenue & Customs and Companies House. If you run a business, you will have to file a self-assessment tax return as a sole trader or as a director of a limited company. In this article, we will guide your through the process of registering and completing your company’s annual tax returns. It is worth noting before we start that self-assessment is changing.

The government want to make tax digital by 2020 but this is not discussed in depth as it will be covered in a future article.

Registering for self-assessment

Filing your self-assessment will allow HMRC to see how much income you have been making from your business and calculate the tax you will need to pay on top of what you’ve already been paying each month through PAYE. There are a number of circumstances under which you will be required to complete a self-assessment tax return, and they include:

  • being self-employed or having become a partner in a partnership
  • being a company director
  • having untaxed income, or complicated income tax affairs
  • having an income of £100,000 or more
  • needing to pay capital gains tax or have expenses to claim

Before you file your self-assessment, you need to first register with HMRC. The process is simple and you can do it by phone, over the internet, or by post using form CWF1. If you have recently set up a business and have not yet registered, you should notify HMRC immediately. You can of course, contact us if you would like support registering with HMRC.

What documents do you need to register?

In order to complete the registration process, you will need:

  • Your National Insurance Number
  • Your personal and business details

In order to avoid any late fines, you must register for self-assessment no later than 5 October after the end of the tax year for which you need to submit a return. If you register late, you might be subject to a penalty. If you think you might have missed the deadline, contact your accountant immediately.

After you successfully register, you will be given a Unique Taxpayer Reference (UTR) number, which will allow you to file your self-assessment.

How to keep and organise your income tax records?

Keeping your tax records accurate and up-to-date is crucial when running a business. It is both your legal requirement and a way to keep track of your income and business expenses. Be aware of the forthcoming changes HMRC is implementing around making tax digital by 2020 – at this time you will have a digital tax account and update HMRC on your tax affairs quarterly.

Filing self-assessment tax returns

Another important step of self-assessment process is filing your annual tax returns. The deadline for your annual paper tax returns is midnight on 31 October, whereas filing online through the HMRC website is 31 January. It might seem like a long time, but organising your records is an ongoing process, impossible to do if left for the very last moment.