While the lure of being your own boss is tempting it does present many challenges. Challenges such as a whole new world of tax implications that you’d have to take responsibility for. By appointing a reliable accountant such as us we can take that pressure away and help you navigate the tax landscape. We can also help you get the most from your earnings and ensure that you get that good balance of work and life without having to spend extra time on laborious tax issues.
As a self-employed person, you will be responsible for paying income tax on your earnings and will usually need the help of an accountant. Especially if you want to make the most of those special tax reliefs and allowances which self-employed people can claim.
Below are a few of our tips and things to note if you’re self-employed, a sole trader or a company director and you pay your tax using a self-assessment tax return;
You need to complete your tax return by 31st January.– You’ll automatically get sent a self-assessment tax return after you’ve registered as self-employed.
Self-Assessment Tax Returns
When are self assessment tax returns due?
There are two ways in which you can file your self-assessment form – either on paper via the mail, or online using a computer and internet connection. The deadline is October 31 for paper filers. If sent in online, your self assessment tax returns must reach HMRC by midnight of January 31, 2014, or you will be penalised £100. However if you have not already registered for self-assessment and need to file HMRC suggest that you register no later than 5th October.
If you need to file a self-assessment return and have not yet registered with HMRC you should call us now on 01708 320596 an we can advice you on your best course of action.
If you work on your own, have a small business and you’re independently earning money, and you are not on a Pay As You Earn, (PAYE), you need to pay taxes on your earnings via self-assessment.
If you’ve received a form in the mail from the government, they’re expecting you to file. If you are not sure what you should do give us a call on 01708 320 596 and we can help you.
Being an independent contractor allows you to have a lot of freedom, but you may need self assessment help with how to file taxes properly. Many people do not realize that there are many factors that need to be taken into account when doing a self assessment. There are tax professionals that can give you self assessment advice to keep you rest assured that you are able to file your taxes properly.
Self Assessment Advice
When you go to get self assessment advice, you need to be upfront and honest about your situation. There are some people who try to only include finances that can be easily tracked when filing their taxes. This is not a good idea because if HMRC finds out that you were not honest when filing your taxes, they could scrutinize all of the taxes that you have filed in the past and any that you file in the future. The self assessment advice will allow you to learn everything that you need to know to ensure that you do not forget to file anything.
Help With Tax Returns
When you need help with tax returns, it is important to get the advice far enough in advance to make sure that you are able to get any additional paperwork that you need. If you wait until the last minute to get the tax documentation that you need, there is a good chance that you will be late filing your taxes because you are not able to get the paperwork in time.
Many tax professionals tell you that you need to go to get self assessment help at least three months before the taxes need to be filed. This will allow you to be sure that you are able to get everything that you need to be able to file your taxes properly. Although we also deal with people who are in a rush and have not attended to their financial affairs as they perhaps should have.
Three months provides you with ample time to be able to get anything additional that you need and ensure that you are not going to have to worry about filing your taxes properly or on time. This is a quick and easy way to make sure that everything is done properly.
Self-Assessment: Perils + Pitfalls of Completing Your Own Tax Return
In my experience the main problem people have with self-assessment is that they don’t actually do it!
People fall into the trap of thinking that if they don’t have additional income they don’t have to pay anything, which is true of course, but the issue is in fact about what constitutes additional income.Additional income is any extra income that is gained over and above what you have paid tax on. Most people working for an employer think that because they do not have a second job or aren’t flogging off the contents of their loft and garage on eBay then they are not liable to complete a tax return. However there are multiple sources of additional income and many people will be earning additional income from these sources.
In this article we will look at who should be filling in a self-assessment form, what is taxable, when this information should all be compiled by and what the penalties are for non-compliance.
Who gets a self-assessment form?
- Company directors
- anyone who is self employed
- higher rate tax payers
- retired individuals with multiple pensions
- What is taxable?
- Second property income
- eBay trading
- bank interest
- private pensions
- personal use of a company car (if not declared on a P11D)
When Should This Info be Compiled and Sent by?
HM Revenue & Customs need to know about any new sources of income or untaxed income by 5th October following the end of the tax year.
There are two deadlines for filing tax returns;
- 31st October for paper returns
- 31st January for online returns
If you are filing online and your deadline is the 31st January and you are NOT using an accountant/agent then it is necessary to pre-register with the Revenue (this can take up to two weeks to be processed and so cannot be done ‘last minute’).
Another thing to consider is that as we approach the deadlines the HMRC telephone lines become extremely busy – sometimes taking hours to get through. Some studies suggest that up to 50% of all calls to HMRC go unanswered!
Consequences of Not Declaring Additional Income
HMRC can go back six years in regular cases and even further in exceptional situations. In this scenario the tax-payer is liable for all previous years tax, plus interest, plus penalties and combined this can often double the size of the original bill.
Company cars are a source of conflict with HMRC – a company car is a taxable benefit and people will try a variety of dodges to avoid paying the tax on these perks.
A recent situation saw a company director purchase a car for company and private use. This was declared to the revenue and the appropriate tax was paid. However things went wrong when he failed to pay tax on the fuel benefit – the fuel was charged to the company but he did not pay the taxable benefit. Ironically in this situation the individual did in fact pay for some of the fuel privately, but due to poor record keeping he could not prove this.
Outcome: He suffered a tax investigation and the Revenue went back six years and hit him with interest and penalty charges, with the total bill being in excess of £25,000, which was more than £10,000 above the original bill!
There are two aspects of this which are taxable;
- Provision of car
- Provision of fuel
Regarding the fuel – if you use the car for private usage but have the fuel paid for by the company then you will be liable for the flat rate fuel tax – this will amount to anything between £1,000 – £2,000 depending on the rate of tax the individual is liable for and the level of emissions given off by the vehicle.
This rate applies even if you only took one private journey in the company car over the course of the year – the revenue only need to prove you travelled one mile in the vehicle to make you liable for the whole amount!
Penalties for Late Filing
If you file electronically (due 31st January) just one-day late, you will be liable for a penalty of £100 – this applies even if you have already paid the tax, or if you do not actually owe the revenue anything. The penalty is purely for late filing!
The £100 penalty is a flat fee that applies for the first three months, after this you will be charged £10 per day for 90 days. This could cost you up to £900.
If it is still outstanding after six months HMRC will charge 5% of outstanding tax (minimum of £300). As the tax bill is probably not known at this point HMRC will perform a ‘determination’ and estimate what you may owe. At this point you will have at least £1300 in fines to pay and possibly more depending on the ‘determination’.
After 12 months there is another 5% (minimum £300) penalty of the outstanding tax bill. So at this stage an individual will have added a bare minimum of £1600 and in reality a lot more.As well as this the above penalties are purely for the failure to supply paperwork. Most individuals in this situation will also not have actually paid their tax and so will be hit with additional fines for non payment!
Penalties for Late Filing
Penalties for Non-payment
The first penalty for non-payment is 5% of the outstanding tax if it is not paid within 30 days (tax is generally due on 31st January).
Once it gets to six months another 5% penalty of the unpaid tax is levied. All this time interest on the outstanding amount is also being added to the bill (interest is charged on both the outstanding tax and the unpaid penalties) and don’t forget the charges for the non-filing too!
After 12 months another 5% is added – again calculated on the entire outstanding amount
After 12 months have passed and no tax has been paid the question you are asking might well be;
What happens if you can’t pay your tax bill?
HMRC put non-payers into one of two categories – ‘can’t pay’ or ‘won’t pay’.
Can’t pay – it is likely that HMRC will be open to making an arrangement in the form of a payment plan. Once you make an arrangement it is imperative that you pay what you agreed. The revenue generally require that the outstanding tax is paid within the current tax year so payments will be decided by how much is owed.
The second stipulation is that you must keep current tax liabilities up to date – it is unacceptable to pay off arrears whilst continuing to build them up in the current tax year.
Won’t pay – if HMRC believe that you can pay but are refusing to liquidate assets they will take the legal route. You will receive letters and phone calls, the case will be passed to a debt collection agency, you will receive CCJs and be taken to court.
File your return and pay your bill on time!
If you are unsure about where you stand with regard to self-assessment then it is important to take professional advice. HMRC do not accept ignorance as an excuse and will pursue incorrect, incomplete and unfiled tax returns to the full extent of the law – and that is quite an extent!