Editor’s note: This post was originally published on 17 January 2014. It has now been completely revamped and updated for accuracy and comprehensiveness.
It’s hurtling toward us as we speak: 31 January 2016 is the last day for UK taxpayers to file their 2014/15 self-assessment tax return. If you miss it, you’ll be hit with an automatic £100 penalty.
Completing a tax return can be fairly straightforward, provided you have organized your tax records well. This could include money you’ve received or earned, other types of personal income, such as income from a trust, capital gains from selling investments, interest from bank accounts, savings income, profits from operating as a sole trader or partnership, etc. You’d also need to collect details of any reliefs you will be claiming on your tax return, like pensions contributions, gifts to charity, etc.
This might seem like a chore but sorting your documents beforehand will save you a lot of time and stress when you log-in to the HMRC portal to file your return. The selection below is by no means exhaustive, but if you are tax return is simple, it will definitely get you started.
Chapter 1: Who needs to complete a tax return?
As a general rule, HMRC sends a self-assessment tax return or a notice that legally obligates you to complete a tax return. But the onus is on you to inform HMRC if you think you need to complete one this year. If you’re unsure, please read our article, Do I need to submit a self-assessment tax return? You can also use HRMC’s free tool to find out if you need to file a tax return this year.
Chapter 2: Registering for self-assessment
To actually complete a tax return, you will first need to register with HMRC. Ensure that you start the process now as it can take up to 10 days for you to receive the Activation Code letter or up to 21 days if you live abroad. To register you’ll need:
- Your National Insurance Number
- Your personal details and those of your business if relevant
Your reward for registering will come in the form of a Unique Taxpayer Reference Number (or UTR Number). This is a 10-digit number that HMRC allocates to those who need to file a tax return.
Chapter 3: Get your paperwork together
- Employment income:
It’s time to dig out your P60/ P45 and P11D forms if applicable – this includes individuals who are directors of their own limited company. If you can’t find these, your final payslip of the tax year should have the information. And if you can’t find your final payslip, speak to your employer. Also dig out records of any expenses you are allowed to claim against tax. You may also need tax records for any pension income, bank interest, state benefits, savings or investment income, property income, etc. In case you need to declare Capital Gains, it would be worth keeping details of investments and property you’ve bought or sold.
- Self-employment income and expenses:
For sole-traders and self-employed, this means keeping records of invoices and business related expenses. These include travel expenses, tools, uniforms, etc. If you haven’t started to sort these documents, the best time to begin is now. Even if you’ve already earned most of your income for the year, you can still make these common-sense moves to reduce the amount of income taxes you owe.
- Partnership income:
If you are in a partnership, this might mean including details of your share of the partnership income on the tax return. However, the partnership will also need to file a partnership tax return.
This applies if you run your own limited company and draw money with a dividend/salary split. Even if dividends are taxed at source or reinvested, you’d need to include them on your return.
- Child tax benefit:
If you earn more than £50,000, you or your partner receives Child Benefit, and you are the higher wage earner, then these payments also have to be included on your tax return.
- Donations/Gift Aid:
If you’ve done any charitable giving and have claimed Gift Aid on it, you should include these on your return.
- Pension contributions:
If you pay into a pension, you should look for an annual statement sent by your pension provider. Don’t rely on your bank statement as you may need to gross these up for tax relief.
- Professional fees and subscriptions:
You can offset fees or subscriptions you pay as long as they can be proved as wholly and exclusively for work purposes. This is only applicable on professional organisations approved by HMRC.
- Rental income:
If you’ve received income from renting out property, these need to go on your tax return. And if you’ve sold property, there might be some Capital Gains Tax to pay.
- Bank interest:
This includes information like interest on loans even if taxed at source. Ideally you should have received a tax certificate from your bank in May 2015 with all the details you need. If you can’t find them, please get statements from your bank.
- Capital Gains:
You’d need this information, if you’ve disposed bought or sold assets such as investments, property or shares.
- Payment on account:
If you’ve made payments towards your last year’s tax bill, you’d need to keep it handy.
The above selection is by no mean exhaustive, but if your tax return is simple, it will get you started.
Chapter 4: What next?
If you get stuck somewhere, HMRC has published a handy video for sole-traders that explains the process. Alternatively, you can also call the self-assessment helpline on 0300 2003310 – but it’s only open until 8pm. If you are Bradleys’ client, you can find more about our tax return service here.
The decision to file on your own is a personal one. We are not going to suggest that you need a professional to file on your behalf. But if your tax affairs are complex and you have additional sources of income such as profits from operating as a sole trader or partnership, renting out a property, foreign income, capital gains or income from a trust, there should be no shame in hiring an expert to help you out.