Filing income tax return when self employed

If you’re self-employed then you will more than likely need to do a Self Assessment tax return. We would recommend getting an accountant to complete your Self Assessment tax return as they will be able to advise you on where to make tax savings. However, if you’re wanting to do your own tax return then follow our guide on how to file your tax return.

What is Self Assessment?

HMRC normally collects income tax from employees directly through the PAYE/payroll system of their employers. However, if you’re self-employed or you have additional income, you need to submit a tax return to HMRC once a year to declare your income and for HMRC to work out the tax you owe.

Do I need to fill in a Self Assessment tax return?

HMRC gives clear advice on if you’re required to complete a Self Assessment Tax return as follows:

You’ll need to send a tax return and pay your bill through Self Assessment if in the last tax year you were:

• a self-employed sole trader earning more than £1,000.
• a partner in a business partnership.
• You’re classed as self-employed if you run your business yourself and are responsible for its success or failure.

You may also need to submit a tax return if you have untaxed income from other sources such as:

• renting out a property.
• tips and commission (for example, you’ve started a hairdressing business and receive tips you for a job well done).
• savings, investments, and dividends.
• foreign income.

How do I file a tax return for self-employed?

Here’s a quick guide on how to file a tax return if you’re self-employed, freelancer or a contractor.

1) Register for Self Assessment

You are required to register with HMRC for Self Assessment by 5 October in your business’s second tax year. You may receive a fine from HMRC if you don’t register by this deadline.

To register for Self Assessment visit HMRC’s Self Assessment registration page and submit your details.

By registering for Self Assessment you will receive a Government Gateway user ID, which you can use to set up your personal tax account. This account allows you to log in and manage your taxes online. You’ll also be given unique taxpayer reference number (UTR). Keep all this information safe as you’ll need it to file your tax return online.

2) Can I file my taxes online if I'm self-employed?

Once registered you have the choice to file your tax return online or on paper – but we’d recommend always doing it online as HMRC will eventually phase out paper tax returns under Making Tax Digital. By opting to file your self-employed tax return online, you’ll have an additional 3 months to submit it.

3) What information do I need to file my tax return?

If you’re self-employed, the main information you need to file your tax return is your income and expenditure.

Remember there are expenses you can deduct from your income to work out your total taxable profit. Download our sole trader guide to find out more about what expenses you can deduct to reduce your tax bill.

You’ll need the following information to be able to complete your self-employed tax return:

• self-employed income.
• employment income (if you’re also employed).
• dividends.
• interest.
• rental income.
• foreign income.
• pensions contributions.
• gift aid.
• pension income.
• payment on account.
• redundancy lump payment or unemployment benefit.
• P11D.
• capital gains.

If you’re unsure about any of the above, then we advise you speak to an accountant and get them to complete your tax return for you to ensure it’s accurate and you pay the right amount of tax.

4) How to complete your tax return online

HMRC do provide a quick and secure system to file your tax return online. However, it’s important that you do it correctly and it can be easy to miss information or not declare everything you need if you don’t have experience. This is where a qualified accountant like dns accountants come in as they will ensure that your information is correct, filed properly, offer advice on minimising your tax bill and liaise with HMRC on your behalf. Our Self Assessment tax return service is quick, efficient, and cost effective and comes with a no penalty guarantee.

But if you still want to file your own tax return, here’s the steps to file your own tax return online:

• Check your personal details.
• Fill in all the sections that apply to you (the system removes sections automatically that aren’t relevant to you based on your previous answers).
• Complete details of what you’ve earnt.
• Add you tax-deductible expenses.
• Check all the details carefully.

5) Confirmation of filing your tax return

Once you’ve submitted your Self Assessment return online, you’ll get a confirmation message and a unique number. HMRC will calculate the tax you owe and your National Insurance contributions.

What happens if I file my tax return late?

If you’re late filing your tax return (i.e. after the 31st January for online returns) then you’ll get a £100 penalty if your tax return is up to 3 months late. You’ll pay more if it’s later or you are late paying your tax bill. You’ll also be charged interest on late payments.

Make sure you leave yourself enough time to gather all your information and submit your return on time. Leaving it to the last minute is more likely to mean you’ll make mistakes or miss something crucial on your return.

Why use an accountant to file my tax return?

There are huge benefits to getting your tax return completed by and accountant like dns accountants, here’s just a few of them:

• Save time: Our process is totally streamlined, fast and efficient and a lot easier than doing your own tax return.
• Fixed price: Our tax return service is cheap and gives you excellent value for money, compared to doing your own.
• Minimise tax: Our tax experts will ensure you don’t pay a penny more than you have to in tax. You’ll get 15 minutes with our tax specialists and receive our expenses guide to know what are allowable expenses.
• Avoid errors: By having an accountant do your tax return you are more likely to avoid costly errors.

If you decide to file your own tax return, but still aren’t sure of anything, then you can contact HMRC directly or you could hire an accountant to take over the process for you. The key to filing a self-employed tax return is good planning and understanding of how the tax system works and what reliefs are available and expenses you can claim.

If you have questions regarding how to file a tax return if you’re self-employed or you’d like dns accountants to file your tax return for you, please speak to one of our dns experts right now on 03330 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.