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Why You Should Go Digital For Your Self-Assessment

by Admin

There are always people who prefer paper-based accounting and self-assessments, reluctant or uninterested to learn to use new tools, they prefer physical copies over digital documents. But this could come at a cost.

By transitioning to digital, your accounts will be easier to manage and they’ll take a fraction of the time to process, enabling you to work on other elements of your business.

We’ve asked Mike Parkes from GoSimpleTax to explain more, and highlight how you can benefit from going paperless.

Real-time answers

Paper, by nature, is chaotic. You’ll need to file and accurately record your accounts – up to six years of your accounts, in fact, to ensure that you are covered if HMRC launch an investigation into your tax return. That’s sure to take up a lot of space, and it also doesn’t provide you with an easy-to-access overview of what you owe the taxman.

Digital files, on the other hand, are much easier to read. Especially if you invest in a tax return solution like GoSimpleTax. Tools like these allow you to record your income and expenditure in real time, meaning that whenever a you wish to know your tax liability it is available in a few short clicks.

Plus, as some tax return software providers also highlight any opportunities to claim tax relief, there’s an extra incentive for you to stay on top of your record-keeping.

Record income more easily

Another benefit of going digital is the ease with which you can record your income. At the moment, you have to log each of your paid invoices into your tax returns. But with invoicing tools, that all changes.

By using software to request payment, any invoices paid will automatically update your accounts. For example, if you receive a payment for an invoice you sent, your predicted tax bill will be automatically updated based on the amount of that payment. This saves you time and also unifies two of your businesses most important admin tasks: invoicing and the tax return.

You can also use these digital tools to understand when to schedule sending invoices as well as the follow-up emails to ensure that customers pay on time. Integrations with online payment solutions like SumUp and PayPal can additionally help your customers pay you more quickly using a debit or credit card, saving you from chasing payments in the first place.

Each of these payments will then filter into your tax returns, making the 31st January tax return deadline much easier.

Enhance security

Tax return and invoicing software also allows you to log all income and expenses in the system. That means no more hoarding scraps of paper – instead, you can take photos of your expenditure and you can upload it to the cloud, where it’s secure and less likely to be stolen.

Be MTD-ready

Last but not least, going digital means you’ll be ready for upcoming legislation. Making Tax Digital (MTD) was a government initiative launched in 2019 to gradually digitalise the UK tax system. It started with MTD for VAT, which stipulated that VAT-registered businesses with a taxable turnover above the VAT threshold would need to digitalise their accounts by 2022.

Soon this will extend to all self-employed individuals with an annual income above £10,000. The reason for this is that the government believes, by using software to submit tax returns, there will be fewer avoidable mistakes. These mistakes cost the government £8.5 billion in 2018/19.

By adopting this software now, you’re well ahead of the MTD for Income Tax roll-out date. So, not only will you be compliant with the incoming legislation, but you’ll also benefit from a streamlined workload well ahead of your competitors.

About GoSimpleTax

GoSimpleTax software submits directly to HMRC and is the solution for self-employed sole traders and anyone with income outside of PAYE to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.

Trial the software today for free – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.

Tags: Employed and Self Employed, HMRC, income tax, Self Assessment, self employed

Who needs a UTR number anyway?

by Admin

** 25/01/21 HMRC updated their guidance to state that they would not be issuing fines for late self-assessment tax return submissions until 28th February 2021. However, the deadline of 31st January remains for payments and any late payments will incur interest at 2.6%.

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If you are a self-employed sole trader, partnership or limited company in the UK a Unique Taxpayer Reference (UTR) number is required. The number is unique to the individual or organisation and will never change.

You will also need a UTR if you have other forms of income or expenses that require you to file a Self-Assessment tax return.

Should you not yet have a UTR you will be unable to submit your self-assessment tax return and could run the risk of upsetting HMRC. Penalties are introduced by HMRC for late filing**.

So, to help reiterate the importance of UTR numbers and how to correctly acquire your own, we’ve asked Mike Parkes from GoSimpleTax to shed some light on their role in tax return submissions.

What is a UTR?

A UTR helps HMRC identify and process tax returns against the correct taxpayer’s records.

If you have income outside of PAYE or own a business and don’t act compliantly when it comes to your Self-Assessment tax return, you could face criminal prosecution.

Who uses them? 

Any individual with self-employed income or income from rental property probably forms the biggest group that will need a UTR.

These individuals will need to perform a Self-Assessment tax return. For other taxpayers, it may also be relevant when registering for the Construction Industry Scheme or working with an accountant.

How can I get one?

As you won’t receive a UTR number unless you’re registered as either self-employed or a new business, you’ll need to do so on HMRC’s website. Alternatively, you can call them on 0300 200 3310. There is no cost to doing either.

Be careful if you have already started trading. HMRC expects you to register within at least three months of the end of your first month in business. They will consider strict penalties if you fail to do so.

To avoid these fines, register as soon as you can with all the below information to hand:

• Full name
• Date of birth
• Email address
• Home address
• Phone number
• National Insurance number
• The date you started self-employment

Double-check that you have fully completed the process if you’re still waiting on your UTR following registration.

What if I’m already registered?

You should already have a UTR code somewhere. If you’ve misplaced it, start by checking any correspondence that you may have received from HMRC. All previous tax returns will reference it, along with any notices you may have had to file a return, payment reminders or statements of account.

In addition, your HMRC online account will also display the code, provided you can access it. If none of these options prove fruitful, contact the Self-Assessment helpline.

About GoSimpleTax   

​GoSimpleTax software submits directly to HMRC and is the solution for freelancers and the self-employed alike to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.

Get started today, it is free to try – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.

Tags: HMRC, income tax, Self Assessment, self employed, self employment, tax return

The Paper Tax Self-Assessment Tax Return – What you need to know.

by Admin

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The paper return deadline is this month, 31^st October, therefore we thought it would be useful to invite Mike Parkes from GoSimpleTax to explain how best to prepare for the Self-Assessment tax return submission and file with confidence.

New comers to submitting Self-Assessment tax returns, should know it pays to know that there are three ways of filing. Firstly, you can submit via the HMRC site and receive instant acknowledgement post-submission. You can also use commercial software to do this for you. Or, you can send a paper tax return to HMRC in the post.

Whichever method you choose, it’s important to understand your exact responsibility. For those who are self-employed sole traders or Landlords letting out UK property, paper submissions can be complicated as they involve additional forms and documentation.

1. Be conscious of the deadline

Should you choose to file a paper tax return, don’t forget to file before the 31^st October deadline. We would recommend sending your paper submission prior to the October deadline, either through recorded delivery or with some proof of posting in order to prove your compliancy.

If you miss the deadline for submitting your paper return, don’t be tempted to file it late – you have until 31^st January to complete one online. Just don’t submit both. You will be charged penalties from the 1^st February for any late submissions.

2. Organise supplementary pages

Remember, it isn’t enough to submit the main SA100 tax return. You need to bundle it together with the rest of your documentation that references your property or self-employment income.

For any income as a landlord, all that’s required is to file an additional form (SA105) and submit it alongside your regular Self-Assessment tax return.

However, with self-employment, the additional sections required of you could be either the SA103S or the SA103F. The difference between the two is that the former is for those who had an annual turnover below the VAT threshold for the tax year (£85,000 as of 2019/20), and the latter is for those who earn above the VAT threshold.

3. Be open to online and prepare for Making Tax Digital for Income Tax

While you may have historically always submitted your tax return by paper, the vast majority of tax returns are now submitted online. Improvements in technology and the extra three months to file are the main incentives to submit an online tax return.

Having an online account with HMRC allows you to not only extend your filing deadline but also check your details at any time to see how much tax is due and act accordingly.

If you’re happy to tweak the way in which you keep your records and adopt digital record-keeping, this will help minimise admin further, as well as enable you to submit your tax returns and automatically calculate your tax.

Going forward as of April 2023 you will have to file your self-assessment digitally to HMRC providing updates every quarter via your digital platform.

Preparation is key, adopt the right approach now it could save both time and money, make the move to digital ahead of the deadline for MTD for Income Tax.

About GoSimpleTax

GoSimpleTax software submits directly to HMRC and is the solution for self-employed sole traders and anyone with income outside of PAYE to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.

Trial the software today for free – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.

Tags: Self Assessment, self employed, self employment, tax return

Should you defer your second payment on account?

by Admin

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If you are self-employed, or have additional income on top of your salary from things such as a buy-to-let property, you need to complete a Self Assessment tax return each year, and then pay HMRC any additional tax due. If all of your income comes from employment and you pay your taxes through PAYE (Pay As You Earn) then you do not need to complete a tax return and the following does not apply to you.

For those that are new to the Self Assessment tax return process, payments on account are one of the most common stumbling blocks. Despite being introduced as an initiative to help taxpayers spread their tax payments, it often results in annual frustration and can actually harm your cash flow if you’re caught unaware.

That’s why, in response to the COVID-19 pandemic, HMRC announced that they would allow taxpayers to defer their second payment on account (that would have normally been due on 31^st July 2020). It is hoped that this gives taxpayers the chance to prepare. But is that the right course of action? We’ve brought in Mike Parkes from GoSimpleTax to set the record straight.

What is a payment on account?

Payments on account are advance payments towards your next tax bill. They’re calculated based on the amount that you paid the previous year.

HMRC splits this amount into two, and places the deadline for payment six months apart from one another. For the 2019/20 tax year, the first was due by midnight on 31^st January 2020, and the second would normally be made by midnight on the 31^st July 2020.

This latter payment is what can now be deferred, as long as it is eventually paid by the 31^st January 2021.

If you had a £5,000 tax bill for the 2018/19 tax year, for instance, you would need to make two £2,500 payments on account towards your 2019/20 tax bill.

But if your 2018/19 Self Assessment bill was less than £1,000 or if over 80% was deducted at source (such as employment), then you will not need to make a payment on account – you would simply need to pay any outstanding tax by the 31^st January.

What are your options?

If you are required to make payments on account, you will still need to pay your second one. Although, as HMRC has offered taxpayers the opportunity to delay this, you can choose to make your second payment as late as the 31^st January 2021, alongside the submission of your Self Assessment tax return.

HMRC will not charge any interest or penalties should you choose to do this. However, by delaying your second payment to January, you do run the risk of having to fulfil all your tax responsibilities at once. This could result in you having insufficient funds in place to cover all your tax liabilities.

Your therefore have three options:

Pay in accordance with the original July deadline

If you can afford to pay your tax bill as you would do normally, you should do. If anything, it creates a sense of ‘business as usual’ in an otherwise tumultuous time.

I appreciate that, for many, paying in July will harm their cash flow. However, it is my view that clearing debt where possible is more sustainable and allows January to mark the start of a new financial year – and a fresh start.

Reassess and reduce liability

If you’re doubtful that you can afford a second payment on account right now, calculate your 2019/20 tax liability before the 31^st July 2020. This will confirm the actual amount to be paid in July 2020, January 2021 and July 2021, and give you clarity. To do this, you need to file your 2019/20 Self Assessment tax return early.

Filing early won’t mean that you have to pay your tax bill early, after all – but it does allow you to determine what your total tax bill will be ahead of time. From here, you can consider two key points:

1. Does the July 2020 payment on account need to be deferred?
2. Do the January 2021 and July 2021 payments on account (for the 2020/21 tax year) need reducing to reflect the impact that COVID-19 has had on them?

Defer to later in the year

Of course, there will be some cases that are unable or unwilling to pay anything towards their tax bill in July now that they can defer. In this instance, it’s important that they are reminded of the Self Assessment late penalties should they wish to push this all the way back to 31^st January and be unable to make payment at that time.

Deferring could have an impact on cash flow in 2020/21. If you are also VAT-registered and have deferred your VAT payment, then it is worth noting that this also needs to be paid by 31^st March 2021.

Ultimately, it falls to you to make the decision that best suits you. However, it is my view that, by planning your 2021/22 payments now, you will be in a much safer position.

About GoSimpleTax

With GoSimpleTax, you can get a clear picture of your obligations. All your income and expenses can be logged in an easy-to-understand format, and their software will highlight areas where you can potentially reduce your tax liability through tax relief.

Register for their free trial today and stay abreast of all the latest tax changes. When you’re ready to file your Self Assessment tax return, upgrade to their full service and submit straight to HMRC.

Tags: Employed and Self Employed, HMRC, income tax, Pay As You Earn, Self Assessment, self employed, VAT

Limited Company Tax Calculator added!

by Admin

Over on our sister site Employed and Self Employed, we now have a Limited Company Tax Calculator. If you are self employed through a limited company (as many people, like IT contractors, can be), then your tax is worked out differently from if you are just plain-old self employed. The limited company pays you a salary, which is typically quite small, and the rest of the company’s profits are paid to you in dividends (after the company has paid corporation tax), which are taxed at different rates from other income. The following graph shows you a comparison of how much income you get to take home as self employed or with a limited company (click on the image for a larger version).

As you can see, in this example (with typical values entered), the limited company approach allows you to take home more of your income. However, this does come at a cost – more paperwork is required for limited companies, including registering with Companies House and having your books prepared by an accountant. Accountant’s fees might eat up a significant amount of the difference in take-home, so it might not be worth switching from one to another. If you’re interested in being self employed as a limited company, speak to an accountant to find out if it is right for you.

To start performing tax calculations, check out the limited company tax calculator over at Employed and Self Employed.

Tags: corporation tax, dividend tax calculator, dividends, Employed and Self Employed, employer's NI, limited company, limited company calculator, Self Assessment, self employed