SELF ASSESSMENT

Self Assessment is the UK Tax Return for individuals.

Self Employed people and Sole Traders file their Year End Accounts by Self Assessment, this is part of the Income Tax system in the UK.

These are the main categories when you will need to register to file a Self Assessment:

You will need to register for Self Assessment if you know you have additional taxable income

Business

• Self-employed Sole Trader (no matter how small the income)
• Partner in a business partnership
• Company Director

Other Income

• Profits from Property (or Land) Rental Income
• Taxable Investment Income (eg. Savings and Investment Income)

We can register you for Self Assessment, please call 020 8801 3470 for more information.

Sole Trader Accounts and Tax

Self Employed people are taxed on the Profits of their business under the Income Tax system, ie. not on the money they take out of the business.

Year End Accounts are prepared first. Tax on the business, along with other personal income, is then calculated as part of the Self Assessment process.

Class 2 National Insurance and Class 4 National Insurance are also payable, if your Profits are greater than the thresholds.

To summarise, if you have not registered your business as a Limited Company, you are regarded as being Self-Employed by HMRC and you will be taxed under the Income Tax rules.

Sole Trader Accounts are normally less detailed than Limited Companies

Income Tax is assessed in “Tax Years”, which run from 6th April to 5th April the following year. For example the tax year 2015/16 runs from 6th April 2015 to 5th April 2016.

Your Year End Accounts must be filed, by Self Assessment, in paper form by 31st October, or online by the 31st January following the tax year just ended, ie. 5th April

We recommend that you start the accounts and tax process in good time. We also believe that your Year End Accounts should be prepared for your own benefit, and we will help you understand them.

Tax is frequently the only reason why businesses prepare their Year End Accounts. As a result it can be quite stressful and gets low priority. However, delays can be costly.

Penalties are charged by HMRC if a Self Assessment is filed late.

Income Tax must be paid by 31st January for the previous tax year. Eg, for Tax Year 2015/16, ended 5th April 2016, Income Tax is payable by 31st January 201

This UK.GOV link explains the options for paying Self Assessment.

Pay your Self Assessment tax bill, and includes HMRC bank account details if you are paying online, and the postal address if you are paying by post.

Please note that if your Self Assessment has been filed online, you will not receive a paper payment request by post.

For new businesses, the HMRC use “Opening Year Rules” to calculate the tax due.

These can be quite complicated, depending on how long a period is covered by your first set of Accounts. If your first Accounts period is 12 months, then you have a nice and neat “basis period”, which will make the calculations easier. If your first Accounts period is not 12 months, then it is a little more complicated!

To keep it simple, we recommend that your business accounts are made up to 5th April each year.