How to File Your Tax Return
Wondering how to file your tax return? Read this guide for simple steps.
Do you need to file a tax return?
Before going through the process, let us settle a rudimentary question made by all, do you need to file one? Taxes are generally deducted from wages and pensions automatically at source for employees and pensioners. In contrast, businesses and individuals with other income that is not deducted at source and above a certain level must file a Self Assessment tax return. Self-employed individuals earning more than £1,000 must file a tax return if they were sole traders in the last tax year. In addition, if you were a partner in a business partnership or director of a limited company whose income wasn’t taxed at source and/or if you owe further tax then you need to file one.
Although your primary source of income will likely be your wages or pension, you still need to file if you work in specific sectors, were paid more than £100,000 when you were paid via PAYE, or have any other sources of income that are not subject to tax.
- Rentals
- Commissions and tips
- Dividends, savings, and investments
- Earnings from abroad
If you are eligible for some tax relief or would like to prove you qualify for one, you can also file an online tax return. The self-employed are entitled to claim Tax-Free Childcare or Maternity Allowances, for example.
Deadlines for filing taxes
You had until 5 October 2021 to register as a self-employed or sole trader for the last tax year. Paper tax returns had to be filed by midnight on 31 October 2021. Electronic tax returns must be filed by midnight on 31 January 2022. Following your first tax return, you may also have to make two payments towards the upcoming tax bill for the current tax year we’re in addition to the tax and National Insurance (NI) due for the previous tax year.
Known as payment on account, you will be required to do it every year for the foreseeable future. Exceptions include if you have paid more than 80% of your tax at source in the previous year, or your last self-assessment tax bill was less than £1,000. In addition, underpaid taxes collected via PAYE the following year count as deductions from income. Payment of the tax due on account must be made by midnight on 31 January for the first payment on account, and by midnight on 31 July for the second payment on account.
Online tax return registration and filing
According to HMRC, the most common reason why people file tax returns online is that it’s easy, secure, available 24 hours a day, and you can subscribe to email alerts and online message services to help you manage your affairs. To complete a tax return online, you need an HMRC online account if you haven’t done so before. In the event you are abroad, HMRC may take up to 21 days to deliver your activation code – so do this well in advance. After you’ve signed up, HMRC will email you an activation code, which may take up to 10 working days to arrive. In addition to your user ID and Unique Taxpayer Reference (UTR), you will also receive a user password.
For taxpayers who have already filed in the past, but not last year, registering again is necessary. Ensure you have all the information you need before submitting your Self Assessment application online. If you have an employer reference, you will need your UTR, NI number, and if applicable, your employer reference number. In this case, you may need your P60 end-of-year certificate, P11D expense or benefit statements, P45 details of leaving work, your payslips, and or your P2 PAYE coding notice.
You’re now ready to fill out the online form. To prepare for the interview, you’ll need your bank or building society statement, and if you are self-employed, you may also need your profit and loss statement and other business records. To start with, you’ll need your personal information. The next question asks whether you received income or gains from employment, self-employment, a company or partnership, property, trusts, capital gains, or if you received them in the UK or abroad. You can check any of the boxes in this section to indicate that you received income from any of the sources listed. This will result in additional questions regarding the sources of income you received.
As part of the third section, you must disclose any interest, dividends, pensions, or benefits you receive from the bank or building society. In the self-assessment form, you should still include these aspects if you are a sole trader. No matter where you earn money, HMRC needs to know about it. Other information requested on the form includes student loans, pension contributions, gifts, charitable donations, child benefits, and marriage benefits.
HMRC will not ask for receipts, accounts or other documentation supporting your Self Assessment return unless you are explicitly asked to supply them. Keep the original documents safe even if you send copies. If you’re providing information on your return, you’re responsible for it, so be sure to fill it out carefully. Make sure that the figures are accurate, and check everything before you submit the form. For all Self Assessment tax returns that you file on time, you must keep track of all the information used to complete them, which includes your accounts and other information. It can be kept by self-employed businesses until the 31 January deadline of the following year. If HMRC comes knocking on your door and you fail to maintain adequate records, you can be subject to a significant fine.
If you are unsure of what to do, where to go, or do not have the time to accomplish all of these things, you may contact one of our experts which can brief and walk you through the process step-by-step.