If you are new in business it’s possible that you will have to complete a tax return for the first time ever. So here’s what you may be thinking ..
I don’t know where to start!
I’m not earning a lot so don’t really want to pay an accountant to do this for me.
I don’t know how to complete a tax return but I’m willing to learn.
So, if you want to do your own tax return, but you’re not sure how to go about it then this blog post is for you.
Here’s how to go about it.
Step 1 – Determine if you need to complete a tax return
You need to know if you must complete a tax return as not everybody has to. Here’s a list of typical people who have to complete a tax return.
- You are self employed and earn over £1,000
- You are a company director
- You have earnings from property rental
- You or your partner’s income is over £50,000 and you claim Child Benefit
You can refer to the full list on the HMRC website here.
Step 2 – Decide how you are going to submit your tax return
In this blog post I’m going to talk about 3 different ways you can submit your tax return..
- Complete a paper return. This involves downloading a form from the HMRC website, completing it and sending in the post. The deadline is 31st October for this type of return.
- Submit your return online using the HMRC website. This must be done by 31st January and is free.
- Sign up for software to help you complete your return. I recommend Taxfiler which I think is more user friendly than the HMRC website. Taxfiler costs £24 per year which allow you to submit one tax return and again the deadline is 31st January.
Step 3 – Make sure you have your personal information
- National insurance number
- Unique Tax Reference (UTR). This is a 10 digit reference which you will have if you’ve completed a tax return previously. If you don’t know your UTR or don’t already have one then HMRC explain what you need to do here.
- Your Employer’s Reference. If you are an employee you will find this reference on your payslip.
- Your Government Gateway login details (unless you are completing a paper return). If you don’t already have login details then check how to register with HMRC online services here.
Step 4 – Gather your income details
Regardless of how you are going to complete your tax return you need to gather all your income details which could take you some time.
Below I’ve listed the main types of income you need to include and where you will find the details to put on your tax return.
1) UK Income – Employment
What were your earnings for the year as an employee and how much tax did you pay? You will find this information on your P60 issued by your employer after the end of the tax year. If you left during the year you will find the information on your P45 report.
Did you receive any benefits such as a company car or private medical? If you did the amount you need to put on your tax return will be on a P11d form which your employer will give to you after the end of the tax year.
2) UK Income – Self Employment
If you were self employed and earned over £1,000 you will need to include your sales for the tax year and your allowable expenses. The tax and national insurance you are due to pay will then be based on your taxable profits which are:
Your business income
Less your allowable expenditure
Less tax allowances for vehicle and equipment purchases
For tracking your business income and expenditure you have some choices.
- If you have very few transactions then it might be as simple as recording everything in a notebook.
- Or you could track all your transactions on a spreadsheet. If you struggle with spreadsheets I’ve got an online course explaining step-by-step how to do your accounts using Google Drive.
- Another option is to invest in software and my recommendation would be to use Xero.
3) UK Income – Pensions
If you receive pension income this will be taxable and needs to be included on your return. If it’s a private pension you should have an annual pension statement with all the details.
4) UK Income – Property
You need to include property details, and the income less the expenditure to work out your taxable profit.
5) UK Investment Income – Bank Interest
You will need to get information on all your bank interest received, and split it depending on whether you have been taxed on it or not. Your bank will provide you with this information, either by post or online.
6) UK Investment – Dividends
If you are a shareholder in any UK companies you will need to include any dividends received during the the tax year. Every time you receive a dividend you should have dividend paperwork confirming the amount.
7) Other Income
The other types of income which are less common are
Foreign Income – savings, dividends and property
Trusts & Estates – UK and foreign
Capital Gains – did you sell any property?
Step 5 – Find Information for any tax reliefs
The amount of tax you are due to pay can be reduced by available reliefs. The main 2 are:
1) Gift Aid Relief
If you are higher rate taxpayer, you can claim back tax on donations you make to charity through the Gift Aid scheme. During the year you need to keep track of the payment date, the amount and the charity. If you donate online you can usually find this information on your account.
2) Pension Payments
If you are a higher rate tax payer, you can claim back tax on pension payments you have made during the tax year. You should have an annual statement from your pension company with a summary of the payments you have made.
Step 6 – Complete your tax return
I’m now going to talk about 3 options for completing your tax return.
Option 1 – Paper Tax Return
This is my least favourite way of completing a tax return, but I know there are people who still want to do it this way. You need to be aware that when completing a paper return there is an earlier deadline of 31st October. So, your 2017-18 tax return is due by 31st October 2018.
The full version of the tax return is called form SA100 and you can download it from the HMRC website here.
Here’s what the 2018 form looks like.
It’s 8 pages long and can be a bit daunting the first time you see it. Here’s what’s included on each page.
Page 1 – Personal details
Page 2 – Answer yes/no questions and mark boxes with an X
Page 3 – Income – interest, dividends, pensions and benefits
Page 4 – Tax reliefs
Page 5 – Student loan repayments, high income child benefit charge, marriage allowance
Page 6 – Refunds, have you paid too much or too little tax?
Page 7 – Tax adviser details, any other information
Page 8 – Signature and date
You will notice that these pages do not have anywhere to enter your earnings as an employee, self employed profits or property income. Instead you need to include this information on supplementary pages which you download separately.
Here’s the list of supplementary pages which you can learn more about here on the HMRC website. To download any of these pages, click on the form name below.
SA101 – Less common income, deductions and reliefs
SA102 – Employees
SA103 – Self Employment (There is a short form SA103S and a full form SA103F)
SA104 – Business Partnership (There is a short form SA104S and a full form SA104F)
SA105 – UK Property Income
SA106 – Foreign Income
SA108 – Capital Gains
SA109 – Non UK residents
HMRC provide notes to help you complete your tax return. The 2018 notes can be found here
Completing your paper return
To complete your paper return, here’s what you need to do…
- Download and print all the pages you need
- Fill in all your information
- Check and double check everything
- Sign and date the form
- Keep a copy
- Send in the post to HMRC
- Breathe a huge sigh of relief!
The advice from HMRC is to send the form to the address on recent correspondence from them or to:
HM Revenue and Customs
Option 2 – HMRC Online Tax Return
I think this is a better option than completing a paper return and the deadline is 31st January instead of 31st October. So, the deadline for your 2017-18 online tax return is 31st January 2019.
I don’t find the HMRC website user-friendly, but hopefully this blog post will guide you through the minefield and let you retain your sanity.
To submit an online tax return you need to be registered with HMRC online services. If you are not already registered …
Once you are registered for HMRC online services you can get started completing your online tax return.
Completing your online tax return
Here’s what you need to do …
Login to HMRC using your Government Gateway User ID and password here. To complete your login you will be sent a security code to your mobile number.
From your account home page go to the Self Assessment section and choose Start now.
Agree any information HMRC already has on file for you.
Click on Next
Review and amend personal information as required, but note that some of the fields are optional.
Click on Save and continue
On the next 3 pages tailor your return for the types of income you have.
You will be able to see the status of your return on the left and there is an option to view and print your tax calculation. This shows you how much you are due to pay based on the information you have input.
If you get stuck or need a break it’s easy to logout and return at a later date. You can do this as many times as you need to.
Before submitting you can view, print or save your tax return.
Do your final checks on everything entered, agree to the declaration then click on Submit.
Job done, and relax!
Option 3 – Online Tax Return using Taxfiler
As an accountant familiar with completing clients’ tax returns, this is my preferred option. It costs £24 to submit an individual tax return but it’s a bit more user friendly than trying to find your way around the HMRC site.
Here’s the Taxfiler website where you can sign up for an account and make payment by Paypal or credit card.
It’s very simple to get started.
You will be prompted to enter your personal details.
Click on the Data Input tab
Click on Add a new Section
Then choose the sections that you need from the following:
- UK Income
- UK Investment Income
- Foreign Income
- Trusts and Estates
- Lloyds Underwriters
- Other Information
At any time you can click on the Tax Calculation tab. This will show the amount of tax due and how it has been arrived at. You can download your tax calculation as a PDF document.
Click on the Tax Return tab. This shows your completed tax return and you are able to scroll through the pages one by one. Again you can download a PDF document.
When your tax return is completed it’s as simple as choosing
Review & File
Prepare for filing
Approve and submit
Step 7 – Remember to make your payment by the due date
Once your tax return has been submitted and accepted by HMRC it’s very important to make payment by the due date of 31st January. The easiest way to pay is by debit or credit card online here.
Tax returns are daunting for a lot of people, but hopefully much less daunting after reading this blog post. After you have completed your first one, it does get easier in later years.
And Finally …
If you are still unsure about completing your own tax return there’s a couple of ways that I can help. You will still do the work by yourself but with additional support from me.
- I’ve created an affordable online course to take you step-by-step through submitting your tax return online with HMRC. It’s available to purchase for only £11.99 here.
- I’m also available for 1-2-1 coaching sessions where I will guide you through completing your return online. If you want to book a session with me, then please head over to the contact page and get in touch.