So, of you live in the UK and you’re self employed, you need to get your tax return for the year ending 5th April, 2016 completed by January 31st 2017. If you haven’t done it yet, you’re probably thinking that you need to get it done this month! If you’ve done it already, pat yourself on the back and breathe a sigh of relief! If it’s your first time, you’re probably panicking! But don’t panic! You’ll get it done! But do get on with it this month because if it’s not in on time, you WILL be fined!
I know that doing your tax return can be daunting but never fear! I am here to help! I’ve listed some hints and tips that will help you get organised and ready for filing your tax return online.
First Of All
- First things first, you’re too late to send your tax return in paper form but you can download a tax return form to print out and fill in yourself as a dry run before you file it online if you really want to but if you do that you may feel overwhelmed and it’ll probably put you off. And to be honest, the HMRC website breaks it down into such easy chunks that it’s a lot easier just to do it online.
- Security is paramount when you’re doing your tax return. Never ever do a google search for HMRC! A lot of phishing websites that look like the official site will come up and once they’ve got your login details for they’ve got everything they need to steal your identity. Always type hmrc.gov.uk into the address bar on your browser and that will take you to the correct page.
- Most people generally only log into their HMRC account once a year so it’s worth logging in before you’re ready to do your tax return so you know of you need to reset your password.
Back everything up! And keep your backups somewhere safe! I use an external hard drive that I keep in my drawer just in case. Also, Microsoft Onedrive, Dropbox and Googledrive are all free for personal use. You can also pay for storage with Apple. It’s 79p a month for 50GB with Apple. You also have the option of a Nazbox but I don’t know a lot about them.
- How many of you get lots of envelopes through the post that you just throw out? Keep them! Write the current month on one of them and put all your receipts for the month in there so they don’t get lost. If you want to keep all your envelopes in a shoe box, do so but don’t just dump them in one place!
- If you get emails with receipts on, never delete them! Always, print them just in case and save them to a folder on your computer so you can find them when you need them.
- Bank statements. Keep them in a file. Most bank statements come with holes punched already so you can file them easily. It’s also worth downloading your bank statements as a Comma Separated Variables (CSV) file once a month and collate it into a spreadsheet. Insert a column between the company name on it and call it analysis. In this column, type the category that the transaction comes under and when you’ve finished, sort the sheet by the analysis column and on the data tab in excel, you’ll be able to subtotal all of the transactions in the relevant categories.
- I know this is too late for this year, but schedule some time every month to collate all receipts and invoices into a spreadsheet to be totalled ready for your tax return. If you do it as you go along, it won’t feel so daunting when you come to doing your tax return.
- At the end of your accounting period (NB your year end doesn’t have to follow the tax year if you don’t want it to), do a stock take! According to the International Accounting Standards (ISA2), stock is valued at the lower of cost or Net Realisable Value (NRV). NRV is when the value you can conceivably get for an item. So let’s say you make something and it costs you £20 to make and you sell you originally for £50. For stock purposes, you would value it at £20. However, if somehow it got damaged and you had to repair it and let’s say it cost another £20 to repair but you could only sell it for £35 because you’ve had to repair it, your cost would be £40 which is more than your NRV. So you would value the item for stock purposes as £35.
- Don’t forget to account for using your home as an office. Bear in mind though that depending on how much you claim, you may have to pay Capital Gains Tax when you sell your house. It’s best to seek professional advice on anything you’re unsure of.
- Keep everything legal and above board! You may think that HMRC don’t care that you claimed your child’s MacDonald’s on your tax return but they will! And bear in mind that if they find something wrong in this year’s tax return, they can go back and investigate the last 7 years’ worth of returns and they will do it if they see anything wrong. And that is very time consuming and expensive because you WILL have to hire an accountant and solicitor to guide you through it.
- Were you employed of in receipt of taxable benefits last year? Make sure you’ve got these figures to hand. You’ll need your P60 from your employer because you’ll need their PAYE Reference number. If you haven’t had it yet (you should have had it by 31st of May every year), check your March payslip. Most payslips have a total paid for the year on the bottom and they should have the reference number you need.
So you’ve got all your figures collated and you’re ready to put your tax return in. What do you do now?
- First and foremost! Get your partner to look at your figures in case you missed anything. Also, get him to check your maths. You want everything to be right.
- Make sure you’re sat comfortable at your desk because this will take a while. Also, make yourself a cup of tea to drink while you’re doing it!
- Count to ten and breathe!
- Read each question and make sure you understand it before you answer it.
- Bear in mind that for most boxes, if your answer is 0, you should leave the box blank.
- Deal with each question one at a time. I know this sounds like a silly thing to say, but lots of people look and the whole tax return and panic! The next question doesn’t exist until you’ve finished answering the last one! Fortunately, when you do it online, HMRC split it up into easily manageable chunks so you can do this easily.
- When you’re finished, you’ll be able to print and save your tax return as a PDF file. Do both! You will need to keep them for 7 years.
- Back everything up!
- Read through your tax return to make sure everything is right and correct.
- Once you’re happy, submit your return. You’ll have to type your username and password in as part of this process. This is normal. Don’t panic!
- Make sure it’s done by the 31st of January every year!
- Breathe a sigh of relief!
I know everyone hates tax returns and filing them but they are a necessary part of business management. Not only does it help the government work out how much tax and national insurance you need to pay but also you can use it as an excise to sit down and work out what you need to do if you want to change anything for this year. There’s also a box in the tax return that asks what date you ceased trading if you’ve closed your business. Every year that this box is blank, makes you a successful business person. So pat yourself on the back and celebrate that while you may have barely managed to stay afloat last year, you did! And if you did have to cease trading last year, know that you gave it your best shot and sometimes circumstances change and every time an old chapter ends, a new one begins and this isn’t the end of the story!
Please put your tax return in on time! You don’t want a fine because they’ll charge you interest on the tax you owe and that will increase every day until you pay. That being said, if you have genuine excise for being late, don’t be afraid to phone them up and tell them why. They are there to help you at the end of the day.
Please note: if you want me to help you with your tax return, do get in touch. My bookkeeping email is firstname.lastname@example.org but please bear it mind that I charge £15 an hour.