How to Get the Right Numbers for Your Tax Return Using Coconut
We know that doing your Self Assessment can be a bit overwhelming. But it doesn't have to be that way! This guide will show you how to use the Coconut app to get to the right numbers for your tax return in six simple steps.
One of the biggest hurdles of being self-employed is tracking income and expenses. When you’re busy—you know, actually getting and doing the work—then fiddling about with numbers might seem like the last thing you want to bother with. But a good habit of keeping accurate tax figures will stand you in good stead and help eliminate that last-minute stress before the Self Assessment tax return deadline.
This guide will help you use the Coconut app to keep on top of your figures. But please note: it is for non-VAT registered sole traders in the UK (including Scotland). If you’re VAT-registered or a limited company, this isn’t for you.
Step 1: Commit
We’re going to assume that you’re already registered as self-employed, have your own 10-digit UTR (unique tax reference) number and have set up Government Gateway (the UK government's secure online service) access. If you haven’t, this can take up to 10 days to obtain, so apply and have a break for a few days, watch some telly, eat some biscuits—or move on to the next step.
Once you’ve made the decision to use the app to calculate your figures, decide to commit. Just a couple of hours (max) on each step will reduce hassle in the long-term.
Step 2: Get everything in one place
The best way to get started is to assemble everything in one place beforehand. This means making sure you have your bank account information, invoices, client information and credit card details all to hand.
And of course, you’ll need your Coconut app, logged in and ready to go!
Prefer to work on desktop?
You can also access the numbers you need for your tax return using Coconut Web. Our Tax tab will guide you through the whole Self Assessment process and help you get the numbers you need on your desktop.
Whether you’re a Professional or Side Hustle user, all Coconut users can access Web. Simply head to Coconut Web and use your existing mobile number and pin to log in.
1. Connect your bank account/s
Coconut allows unlimited bank connections, allowing you to see all your transactions and add notes, receipts and categories as you go along. These accounts can include:
Check if the invoices for the tax period are paid and make sure they match to your income in transactions. Coconut lets you create invoices, send them to clients and match them with the incoming payments. Once in the Invoices tab, you can search for the client by name, check you've been paid and mark the invoice as paid manually too. If you haven't been paid, you can send your clients a reminder.
Step 3: Calculate your self-employed income
During this step, you’re only looking for one figure: how much money you made from self-employment for the tax year. For this year, this means working out how much income you collected between 6th April 2020 and 5th April 2021. It also means collating not just money into your bank account, but also into your Paypal account or any apps you use, such as Upwork or Uber.
Make sure you differentiate between your personal and business transactions in the app. If you have transactions that are part-business, part-personal, Coconut allows you to split them and for you to indicate how much was associated with business (and what category it belongs to).
Be sure you also check your income from services such as iZettle. Even if you have £2,000 in fees deducted from Stripe, if you don’t account for it, this could have implications for things like a mortgage application or a business growth loan.
If you receive any employment income, go to your Tax Profile and add your Employment Income for the year. If you receive employment salary into a linked Coconut account, make sure you mark this as ‘PAYE income’. This will ensure it doesn’t get counted twice against your income for tax.
And, yes you do need to declare cash you receive for any work you do by adding it to your income figure (make sure you match it to the relevant invoices). If you don’t do this, you could be open to an investigation, and could find yourself liable for the tax you owe as well as from 10%-50% extra.
Cash income can be added as manual adjustment, or entered as a total in your tax profile under ‘Other income’.
By the way: if you do find any additional income after submission (lucky you!) you can complete an amended tax return.
Step 4: Ensure your expenses are correctly backed up and categorised
Good record keeping is essential in case HRMC ever investigate your expenses, it reduces your overall tax bill and, well, it’s just good to be organised isn’t it? Whether you’ve got your expenses recorded in receipts in a drawer, through a dedicated business account or on credit cards, you can use our expenses feature to back each one up with corresponding receipts and categorise them appropriately. So, now it’s time to make sure you’ve done that for all of your expenses.
1. Whenever you have a business expense, ideally you should snap a picture of your receipt and attach it to the relevant transaction, so that you can account for where the money went.
2. Whenever you mark a transaction as “business”, ensure that you also link it to the correct sub-category. To speed up the process, Coconut also allows you to apply the same category to multiple transactions from the same merchant.
If you’ve kept on top of this throughout the year, this step will just be a case of scrolling through your transaction feed to check that everything is as it should be. If you’re starting from scratch though, that’s also fine—just grab a coffee and power through.
Step 5: Make sure you’re aware of allowances and adjustments
Did you know you can claim a work from home (WFH) allowance and a petrol/mileage allowance as simplified expenses? If you do all or most of your work from home, you can claim a flat-rate fee as an allowable expense or apportion actual costs using our Coconut Work From Home Allowance Calculator.
Also use this time to add up any other cash expenses and extra income that might not have been captured in your transactions and put it in your Tax Profile in Coconut. This could include money from rental properties, savings accounts, a Self-Employment Income Support Scheme (SEISS) grant or inheritance money. Find out more about how to declare Covid-19 grants here.
Step 6: Submit
Have a final look over everything else you need to input. Do you have proof of your marital status, which student loan plan you’re on (the government will take a portion of your salary when you earn above a specific earnings threshold) and how much you owe? If you’ve been employed in recent times then make sure you have your P60/P45. We understand these additional considerations can make things even more complicated, so we created a guide about employment income and student loans that gives you more detail about these.
You should now have all the information you need to fill in your Self Assessment. The numbers you see in Coconut will be an estimate, but if all of the details you have entered are correct, this will likely be the tax you see on your Self Assessment.
To access your SA103S numbers in the app, use the taxes tab and select ‘Self Assessment’. Keep these handy, as you’ll need to plug these into the online form. If you’re a Scottish taxpayer, you’ll need to work out your tax band (Scotland has five tax bands instead of three).
But it’s worth saying that, formally, the deadline remains 31st January—and interest will still be payable from 1st February, as usual. So, as always, it’s still best to sort your taxes earlier rather than later if you can.
Invite your accountant
You can invite your accountant to use the Accountant Portal and have read-only access to your account. From here, they can view your income and expenses and export all your data. They will have the option to export the data into a spreadsheet by selecting CSV format.
Payments on account
After you’ve submitted your first tax return, HMRC may ask you to make payments in advance for your bill—this is called Payments on Account. If you haven’t factored this in, this might come as a shock—as you’ll be expected to pay an additional, estimated amount for your next tax bill, on 31st January and 31st July.
It’s a good idea to make sure you have enough set aside to cover this. In Business tab in Coconut, you have a monthly view which breaks down how much you should be setting aside for your tax bill.
To make your next tax return easier, you could sign up for a dedicated business current account (if you don’t have one already). This will mean all your income and outgoings occur in the same place…much easier to cope with on day of reckoning.
You could also consider working with an accountant as things get more complex, as they will be able to provide ongoing tax advice, allowing you to focus on what you do best.
Either way, using Coconut on a regular basis will enable you to track your income and expenses as you go, and work out how much tax you need to set aside throughout the year.
Haven’t got your Coconut account yet? Sign up now to save time and stress on your tax return.
We’re delighted to announce that Coconut’s simple accounting and tax software for sole traders and accountants now supports subcontractors on the Construction Industry Scheme—taking us yet another step closer to ensuring that our software supports the whole of the UK’s sole trader community ready for MTD 2024.
We commissioned Opinium to survey 500 UK sole traders to better understand their views on Making Tax Digital for Income Tax, how prepared they are for the changes, and what action they expect to take to become compliant with the rules. The results revealed an incredible opportunity for the accounting industry.
Self Assessment tax returns are a key task in every self-employed person’s to-do list. In this guide, we cover everything you need to know about completing your tax return for HMRC, so you know exactly what income you need to declare.