Top Tips for getting Self Assessment right

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A self-employed individual is someone who is earning a living from an independent pursuit of money, rather than working for a company or individual operating a Pay as You Earn (PAYE) wage structure; but not everyone who is individually earning needs to be registered as Self Employed, or required to submit a Self-Assessment tax return, and as with many other financial matters, there are timescales to be aware of, and penalties for getting it wrong.

We’re going to take a brief look at the requirements for registering when notification to HMRC needs to be made, and what you’ll need to do as a self-employed person to ensure you and your new business is compliant and ready to start earning.

Who Needs to Register for Self-Assessment and When?

Individuals who are earning more than £1000 per year, before taking anything off that tax relief can be claimed on, must register with HMRC as self-employed. You are asked to inform the tax office at the earliest opportunity, but legally you must register by the 5 October after the end of the tax year in which you became self-employed.

The tax year runs from 6th April to the following 5th April, so if you started your business in May 2023, you would have until 5 October 2024 at the latest to let HMRC know. Generally, you wouldn’t need to fill in a self-assessment return if your only income is from wages or a pension, but you could be required to do so if you had untaxed income from rental properties, tips and commissions, foreign income, or income from savings, investments, and dividends.

If you are only selling personal possessions (including jewellery, paintings, antiques, coins, and stamps, etc) that were not bought with the intention of selling for a profit and were sold for less than £6000 in total, you’re not required to inform HMRC about the income. However, if you sold them for more than £6000 and made a profit, you may be required to pay Capital Gains Tax, and this could require a yearly Self-Assessment return.

What Information Should You be Keeping as a Self-Employed Individual?

If you’re sent a Self-Assessment return, whether you think you require it or not, you’re legally obliged to fill it in and return it to the tax office, so it’s important to keep track of what you’re earning, what you’re spending, and have the right records in case HMRC request further information from you.

Businesses, even sole traders, need to keep careful records of their incomings and outgoings, and any taxable expenses, reliefs, or benefits which you are applying to your accounts. It’s important that your records are accurate, complete, and readable – because even though there is no fixed format for keeping your records, HMRC can charge you a penalty if your records aren’t correct, full, and legible.

There may be times when you don’t have all the information to hand, and it may take longer than the fixed deadline to get it together – in these instances, you should not ignore the self-assessment return, or fail to include the figures, rather you can use a ‘provisional’ or ‘estimated’ figure until you’re able to supply the proper amount. However, it’s not advised to do this more than necessary, as you still need to provide the correct amount, and you could end up having to pay interest and / or penalties if your estimated figures are wrong and leave you underpaid on your tax.

Understanding the self-assessment system, the records your need to keep, the tax reliefs and benefits that are available, and how to get everything ready on time is an essential undertaking for every business, and it’s not always easy to figure out, especially when growing profits can lead to new challenges such as VAT.

How Can We Help You?

Here at Yorkshire Accountancy, our experts have decades of experience with self-assessment, and we can advise you not only on how and when to register, but the best software to use, the benefits and reliefs you can claim, and our services can take the stress out of preparing your accounts and even take care of submitting your return.

Get in touch today and discover how we can help you and your business grow.

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