What is it? Or rather: what is it other than a phrase that terrifies many, stresses out
more, and bores or baffles everybody else?
It is mainly for the self-employed so whether on your own or in a partnership. It also
affects directors of limited companies, some pensioners, subcontractors, people who
have rental properties, and those people who are employed but fortunate enough to be
paying high rate tax.
How do I even begin to approach Self-Assessment?
If you are in business make sure you keep accurate and up-to-date business records,
an accountant can help you in this respect by telling you exactly what you need to keep
hold of. The receipt for the sandwich you ate with a bag of crisps and a can of Fanta will
need to be stored away safely just like the invoice for the new desktop you just bought.
See the section of Accounting and Bookkeeping for more details.
If you are employed, keep details of all tax statements (P60, P45, P11D), details of
interest, and all other income received, as well as details of any expense you incur
whilst employed. Don’t write it down on a number of sticky post-its because they will fall
off your desk, get stuck to your shoe and wind up down a supermarket aisle. A
notebook will suffice.
You have to complete your tax return, submit to HMRC, preferably on time, and pay the
correct amount of tax, again within the time limits.
Find a marker pen that will not wash off or get smudged over time. Walk over to your
wall calendar and put these dates in:
31st January: PAY TAX
31st July: PAY TAX
Self-Assessment in a little more detail
Self-Assessment basically means that you take into account all of your resources of
income, such as property income, savings, dividends, PAYE etc. You would then deduct
a personal allowance (for 2014-15 this is £10,000) and then your income tax and class 4
national insurance liability is calculated. If your liability is over £1000 then payments on
account are required.
To go into a little more detail, the lower limit for class 4 national insurance is £7,956
and the upper limit is £41,865. Subcontractors will need to take into account the
Construction Industry Scheme (CIS) tax suffered.
An increasingly popular way of running your business because of the tax breaks it can
afford. If you are currently self-employed, we can quickly assess whether this would be
a viable option for you. Directors become an employee of the company which also has
shareholders that may or may not hold different classes of shares. So, one shareholder
might have 40% share of the company while the others each hold ten. Or, there could
be 5 shareholders that each possess 20% of the shares. Always remember that a 50%
shareholder will have half the say in a company and a 51% shareholder can take control of said company.
Limited companies pay corporation tax and profits up to 300k are taxed at 19%. Ouch!
Profits more than 300k are taxed at a marginal rate. So try not to make 301k profits! The
company must submit a CT600 12 months after the year end, although the tax must be
paid 9 months and a day after the year end.
Penalties and Interest
For late submission of tax returns and tax payments, penalties and interest will be
charged by HMRC.
If late submission is an issue because you are struggling with your accounts or
bookkeeping then consider outsourcing this work to an accountant.
Is there anything I can get back?
It all depends on your year-end figures. If you qualify then you could be eligible for
capital allowances and so could claim:
Annual Investment Allowance (AIA)
First Year Allowance (FYA)
Writing Down Allowance (WDA)
There is a special 10% tax pool for low emissions cars.