Are you a self-employed chair, space or room renter? If so, you’ll need to ensure that you meet the deadlines for sending your Self Assessment tax return and paying any tax you owe. This blog post covers:
- Penalties: why it’s important to get things right
- Doing Self Assessment for the first time
- Self Assessment tax return deadline
- Payment deadlines
- Keeping records
- The information you need to provide
- Budgeting for your tax bill
- If you can’t pay your tax bill
- Checklist
Avoid paying penalties
It’s important to meet deadlines for your tax returns and tax payments.
In normal periods, you will have to pay a penalty of £100 if your tax return is up to three months late. The penalty will increase if your return is more than three months late. You’ll also be charged interest on late payments. Always allow five working days for your payment to go through.
You can only appeal against penalty charges if you have a ‘reasonable excuse’ for being late with your return or payment. Reasonable excuses include having to deal with issues such as the death of a close relative, serious illness that prevented you from dealing with your tax affairs, or computer/software failure.
Due to coronavirus HMRC will waive late filing/payment penalties for tax returns submitted before midnight on 28 February if you can’t.
HMRC advice is, like almost 6.5 million people so far, is to still submit your tax return on time. HMRC has stated they will still mark the tax return as late, although you won’t receive penalties.
Tax returns treated as being received late have the following downsides:
- Although there will be no penalties, interest will be payable from 1 February on any unpaid tax, so it’s better to pay on time if possible.
- You’re extending the enquiry window, potentially giving HMRC extra time to open an enquiry into your tax return.
- Benefit entitlement may be affected if you’re a Self-employed taxpayers paying Class 2 NIC’s who needs to claim certain contributory benefits if you’ve not paid your Balancing Payment by 31 January.
Doing Self Assessment for the first time
“If you’re sending your tax return for the first time you must register online with HMRC. You will then be sent your Unique Taxpayer Reference (UTR) number which you need to make your tax returns,” advises Mike Parkes from NHBF Trade Member GoSimpleTax.
“And you must register for Self Assessment by 5 October in your business’s second tax year. Otherwise you may risk a fine.”
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Self Assessment tax return deadline
The final deadline for filing your Self Assessment tax return is 31 January each year, but don’t leave it until the last minute, advises Mike.
“You can file your tax return at any time after the start of the new tax year – you don’t have to wait until the January deadline.
“For example, you can send in your tax return for the tax year 2020-2021 any time after 6 April 2021 when the next tax year starts – as long as it’s before the deadline of 31 January 2022. So there’s plenty of time, and no need to leave things until the last minute.”
If you file your tax return early, you will not be expected to pay your tax bill any sooner – the usual January and July deadlines will still apply (see below).
Payment deadlines
You will normally have to make two payments each year. These are called ‘payments on account’ and the amount is based on how much tax you paid in the previous year.
These payments are due by 31 January and 31 July. If these two payments don’t cover your tax bill, you will also have to make a ‘balancing payment’ by 31 January.
Keeping records
As a self-employed chair, space or room renter, you will need to keep accurate records of your incomings and outgoings. You will need this information to file your Self Assessment tax return.
There are no rules about how to keep your records. You can keep paper records, digital records or keep track via a bookkeeping software program.
Remember to keep proof of all your incomings and outgoings. For example, receipts for stock purchases, bank statements and sales invoices.
You will need to keep your records for five years after the tax return deadline date.
The information you need to provide
When filling in your Self Assessment tax return you will need to state:
- Your National Insurance number.
- How much income you have received.
- The business expenses you have paid out.
- Any pension payments you make.
- Any donations to charity you have made.
“You will also need to provide information about any other income you receive, says Mike. “For example, income from property.”
HMRC will then calculate how much your tax bill is based on all the information you provide. HMRC will also calculate how much National Insurance you need to pay.
Budgeting for your tax bill
Get organised and set aside an amount of money each month towards your final tax bill. You can use the ready reckoner on the government’s website to get an idea of how much tax you will have to pay. This will help with your budgeting.
You can also use the government’s ‘payment on account’ system to pay towards your tax bill on a regular basis throughout the year, rather than being faced with a large payment all at once. You can decide how much you pay each week or month towards your final bill. Find out more on the government’s website.
What to do if you can’t pay your tax bill
If you’re having difficulty paying your tax bill, don’t bury your head in the sand. Contact HMRC as soon as possible to explain the situation. You may be able to set up a plan to pay in instalments. You may also avoid a penalty payment if you try to sort things out as quickly as possible. The HMRC’s Payment Support Service number is 0300 200 3835.
GoSimpleTax
NHBF Trade Member GoSimpleTax provides specialist software to make filing tax returns faster and more straightforward. NHBF Members benefit from a discount and can try the software free for 14 days. Sign up for the free trial at www.gosimpletax.com/tax-nhf
Checklist
- Self-employed chair, space and room renters must file their own Self Assessment tax returns.
- You will be charged a penalty fee for late returns and/or late payments.
- You will need a Unique Taxpayer Reference (UTR) number to file your online return.
- You must keep records of all your income and outgoings for five years.
- Contact HMRC as soon as possible if you cannot pay your tax bill.
- Consider using specialist software to help with your Self Assessment tax returns.
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