How to Submit Your Self Assessment Tax Return in Half the Time
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Tax advice
29
March 2022

How to Submit Your Self Assessment Tax Return in Half the Time

Freelancers: make “January panic” a thing of the past with our quick-start guide to doing your Self Assessment tax return. We've broken the process down into bite-sized chunks—so you can tick that job off your to-do list in half the time!

The Coconut Team
The Coconut Team
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For some, filling in a tax return is the most terrifying and/or boring part of running a business. Some people leave it to the last minute and file in a blind panic; others hire an accountant to outsource it as they grow their business. But doing it correctly is essential—not only to ensure you’re on the right side of the law, but so you know how you’re doing and can improve both your cash flow and overall working habits. 

Knowing what you can and can’t claim for can also end up saving you considerable money too.

We know that the hardest part is getting started on your tax return, so we’ve broken it right down into five manageable chunks that you can do in one week, one day a week for a selected period, or however you choose to manage your time.

Of course, if in any doubt, we recommend that you use an accountant to help you with your freelance finances—as it will save you time and make sure you get it right.

Your 5-step Self Assessment plan

Today: Commit

Day 1: Get everything in one place

Day 2: Collate your self-employed income

Day 3: Work out your expenses

Day 4: Any other income

Day 5: Submit

Today: Commit

Before you start the process, make it easy on yourself by creating the headspace for the task.

Determine a time when you’re going to commit to working on your Self Assessment. Is it 10am each day? Is it every evening when the kids are in bed? Is it before everyone’s awake? 

Put a reminder in your phone and stick to it. Remember, everything is manageable if you break it down properly.

Day 1: Get everything in one place

You need to register as self-employed no later than 5th October after the end of the tax year in which you started your self-employment.

Before you start your tax return, you need to already be registered as self-employed. This means you have a 10-digit UTR (unique tax reference) number. If you don’t have this already, you’ll need to get it before you fill in your tax return. Typically this can take from seven to ten days, so make sure you do it in good time.

You also need to set up or have Government Gateway (the UK government’s secure online service) access. If you’re setting this up for the first time, you’ll need a passport or P60 to prove your identity. You’ll need to activate the Self Assessment module and HMRC will send you a code through the post (again, this can take up to ten days). Once activated, you will be able to log in and submit your tax return.

This is also the time to ensure that all of your invoices are up to date, chase any overdue payments or (in extreme circumstances) draw a line under that bad job you never got paid for and are never likely to be paid for.

Day 2: Collate your self-employed income

On day two, it’s time to look at your income over the tax year (6th April to 5th April of the year you’re submitting the return for). Most sole traders use the ‘cash basis’ of accounting. This means only declaring money when it comes in and out of your business and at the end of the tax year, and only paying Income Tax on money received during the accounting period.

It should go without saying that your income should match up with your invoices, so make sure you can account for where each piece of money came from.

You'll also need to ensure that you collate all income sources and reports, including things like Stripe reports. That's because, for Stripe, you get paid net of the fees—so to ensure you're using the correct figures for your tax return, you need the gross figure to ensure the sales figure is correct. If you don’t get this right, it could have an impact on applying for a mortgage, as you may have under-declared your sales.

If you find income after submission (lucky you!) you can complete an amended tax return.

Day 3: Work out your expenses

Perhaps the most exciting and frightening bit of the tax return, getting your expenses right is important. It can be a lovely surprise to find out that things you thought you’d shed money on can provide you with some relief. But it’s important to get your deductibles in a row.

Allowable expenses

It would be lovely to expense school fees and your brand-new Fender Strat, but a good rule of thumb is that you can only claim for expenses which are ‘wholly and exclusively’ incurred in the performance of your duties (so unless you’re Jeff Beck, let the guitar lie). Check out our complete guide to self-employed expenses for more information on what is and isn't allowable.

What type of receipts do I need to keep for my expenses?

In short, as many as you can. Credit card receipts and debit card receipts aren’t technically a valid receipt because there’s no detail on what was purchased and no evidence that purchases are wholly and exclusively for your business.

Moreover, if you’re registered for VAT there’s no split on the VAT account. The gold standard is to keep every single business receipt, just in case. What counts as a receipt is something that shows what was purchased, date, value, and VAT if applicable. If cash is withdrawn, then receipts will be needed to account for each purchase.

Day 4: Gather everything else outside your self-employment income

Now it’s time to gather up evidence of all the other (taxable) income you might have.

  • Do you claim child benefit? 
  • Did you receive any Covid support (such as the Self-Employment Income Support Scheme (SEISS) grant)? 
  • Do you have savings accounts, shares, inheritance or rental properties? 

Make sure you have an accurate record of any other money that HMRC might need to know about.

Day 5: Submit your form

Woohoo! You made it. You should now have your codes and references and all the information you need to fill in your form correctly.

It’s a good idea to submit your form well ahead of the Self Assessment deadline (31st October for print and 31st January for online) in case of internet problems, time pressures and general life getting in the way.

You’ll have to pay a late filing penalty of £100 if your tax return is up to three months late and more if it’s later.

If you’ve completed the last four steps, this last bit probably won’t have taken two hours…so we suggest spending the last bit having a leisurely cup of tea and congratulating yourself.

Self Assessment Tax Return FAQs

How likely am I to be investigated?

It’s estimated that around 7% of tax investigations are selected at random, so technically everyone is at risk. In reality, most inspections occur when HMRC uncover something is wrong, or triggered when a submission deviates from the industry standard. This is why it’s really important to get it right.

There are a few things that will alert HMRC.

If your profits or drawings are too low then they will want to know how you’ve existed. If money has been introduced to the business and unaccounted for they might want to know where it’s come from.

If your expenses are much higher or differ too much from previous periods, this could cause concern, likewise if you generated low sales but certain expenses were abnormally high.

What happens if I fill in the form wrong?

If you submit a document with an error, HMRC will charge a penalty if the error is:

  • because of a lack of ‘reasonable care’ 
  • deliberate—such as intentionally sending incorrect information 
  • deliberate and concealed—for example, intentionally sending incorrect information and taking steps to hide the error.

If a penalty arises because of a lack of reasonable care, the level of the penalty will depend on the reasons for the error and the potential lost revenue (PLR). The PLR is an additional amount of tax which is due or payable as a result of correcting the inaccuracy.

For example:

  • if a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
  • if the error is deliberate, the penalty will be between 20 and 70% of the extra tax due
  • if the error is deliberate and concealed, the penalty will be between 30 and 100% of the extra tax due

This penalty might be reduced if you inform HMRC about the error quickly. HMRC may make further reductions depending on the quality of the disclosure. Penalties can be reduced by:

  • telling HMRC about the errors
  • helping HMRC work out what extra tax is due
  • giving HMRC access to check the figures

Using Coconut will make submitting your Self Assessment even easier

Coconut's smart tax app connects to your bank accounts to help you track income, categorise expenses, and work out how much tax you owe in real-time—making it easier than ever to submit your tax return.

Download our app now to get a 30-day free trial.

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