There are usually tons of questions being asked during January about Self-Assessment. As the strap-line goes ‘tax doesn’t have to be taxing’ but unfortunately it often is for many, and as accountants we can see why! We have answered some of the common questions below but if you have any others then fire away and we will answer them for you.
How do I pay the tax and National Insurance (NI) due?
You have to make sure your payment reaches HMRC by the deadline, which is the 31st January. The time you need to allow depends on your choice of payment method. You can pay on the same or next day online or via telephone banking (Faster Payments), via CHAPS, at your local bank or building society, or at the Post Office. It takes three working days to pay via Bacs or post. The deadline date falls on a Saturday this year so realistically you need to make sure your payment reaches them on the last working day at the latest (Friday 30th January).
What happens if I miss the deadline?
You must pay immediately or HMRC can take action against you. You can make one-off payments for any overdue amounts you owe.
It might be possible for you to get more time in order to pay or to pay your bill in instalments but only HMRC have the power to issue an extension or instalment plan. You best bet is always to let them know in good time what the issue is.
If you do not have a reasonable excuse for missing the deadline then penalties and interest will apply which only makes your tax bill bigger.
If you would like to get an idea of the scale of penalty you could be looking at use Gov.uk’s calculator here: https://www.gov.uk/estimate-self-assessment-penalties
If you disagree with HMRC’s tax decision (the amount of tax you owe) then you need to contact HMRC to discuss this with them directly.
What if you are no longer self-employed?
You have to tell HMRC if you have stopped trading as a sole trader or have decided to end or leave a business partnership. You will also have to send a final tax return and tell any employees that you are shutting the business down. HMRC will need a tax return by the same deadline that applies to everyone else (31st January).
The final tax return will require you to work out your trading income, add up all allowable expenses (including any costs that are involved with closing down your business), work out your capital allowances (including any charges for sold business equipment/machinery), calculate any Capital Gains Tax owed on any assets sold or ‘disposed’ of, work out your final profit or loss.
What tax relief can I claim?
Your final tax bill could be reduced if you are eligible to claim tax relief in the following forms:
Entrepreneurs’ relief – This could reduce the amount of Capital Gains Tax you need to pay
Overlap relief – This can prevent you being taxed twice on your profits if you stoped trading during a tax year
Terminal loss relief – This can offset a loss made in your last tax year against your profit in the 3 tax years previous to it
What Expenses can I claim?
There are costs that you can claim as allowable expenses. When you are self-employed your business has various running costs and some can be deducted from your final tax bill as they fall under the category of allowable expenses.
Running a limited company enables you to deduct any business costs from your profits before tax.
- Allowable expenses include:
- office costs, eg stationery or phone bills
- travel costs, eg fuel, parking, train or bus fares
- clothing expenses, eg uniforms
- staff costs, eg salaries or subcontractor costs
- things you buy to sell on, eg stock or raw materials
- financial costs, eg insurance or bank charges
- costs of your business premises, eg heating, lighting, business rates
- advertising or marketing, eg website costs
You could also claim capital allowances when you buy something that you keep and use within the business. This could include equipment, machinery, and business vehicles.
If you use something for personal as well as business use you must be sure to only claim allowable expenses for the business costs. Examples could include a family car where you would claim business mileage for business trips, or a mobile phone that would require an itemised list of business and personal calls so you could claim allowances for an appropriate amount.
If you work from home then you could claim a proportion of your costs for:
- Council Tax
- mortgage interest
- internet and telephone use
These are questions we get asked quite frequently, if you have any others you would like to run by us then you can contact us on Facebook (AccountantsABC), Twitter (ABC_accounting), via email (email@example.com), or pick up the phone and ask us in person 01427 613613.