You’re a one man band, you freelance, you’re a heart-centred business, a female entrepreneur, a blogger.
Can you do your own self assessment tax return?
This is a long post, and a goody, so sit down, make yourself a cuppa or pour a glass of red, and get comfy.
If you’re going to save til later, make a note so later actually happens! Nothing like forgetting and then kicking yourself when the stress deadline rolls around yet again.
Are you sitting comfortably? Then I’ll begin.
Let’s break it down into limited company directors and sole traders (click here if you aren’t sure which you are).
Doing Your Tax Return As A Director
- Easy to do your own self assessment for most one man band directors
- Fill in an employment page for your directorship
- Fill in details for all other income (e.g. another job, savings interest, self employed income)
- Check areas you may need help with (e.g. property, capital gains, what to do with dividends)
Let’s pause for some cake. I like cake.
Doing Your Tax Return As A Sole Trader
- Often easy to do yourself for most sole traders
- Fill in the self employment pages for each business/trade
- Fill in details for all other income (e.g. a job, savings interest)
- Check areas you may need help with (e.g. expenses, capital items, property, capital gains)
It’s more complicated if you’re a sole trader as you do your accounts through your tax return.
Difficulties with sole trader tax returns usually happen with the self employment pages.
Let’s have a unicorn at this point as a tax return can feel like a mythical creature we have trouble getting a grasp of.
That’s a real unicorn so no excuses not to get this bad boy tax return sorted.
You with me?
5 Common Problems Doing The Self Employment Pages
- Record keeping
- Which expenses can be claimed off your tax bill
- Capital items
- Not knowing what to do with a loss
Let’s look at some issues and why they can be a problem.
You need to keep your invoices, receipts, statements, evidence of your transactions and why they’re entered as tax-deductible (if they are).
(Tax-deductible means you are permitted to deduct the cost of an item from your business income)
It can be a bit of a nightmare finding everything if you haven’t kept it all where you know where it is. You don’t need to be a saint but you do need to take ‘reasonable care’ (HMRC speak for giving a shit).
Once you’ve had the experience of spending 3 hours looking for a receipt or statement it hits home that the lazy option is to be organised.
Seriously. Call me, ok? I can help.
Expenses are the costs you have as part of the day-to-day running of your business (see capital items for what doesn’t count as an expense).
The 3 biggest issues are allowed and disallowed expenses, claiming a capital item as an expense, and not entering disallowed expenses into your accounts (stay with me, ok? Concentrate!)
1. Allowed expenses are those HMRC permit you to deduct from your self employed income (giving you a lower level of profit you need to pay tax on). Disallowed expenses are those you are not permitted to deduct, even if they are ‘wholly and exclusively for business’ (more HMRC speak) as their view of wholly and exclusively often differs from the common interpretation.
2. It’s easy to claim a capital item as an expense when you’re new to doing self assessment. Have a look at the Capital Items item for more details.
3. Do enter all business expenses into your accounts, even if they aren’t deducted from your tax bill. A lot of people don’t. You can’t calculate your overall business profit unless you know all the numbers, so keep those records. (It’s also part of taking ‘reasonable care’). AND I can hardly help you get a tax refund if you don’t keep records of everything can I?
(if you’re the person going ‘holy hell, I have no records, and no idea where to start’, it’s ok. We can sort it. Honest. Relax and make the call. Click here ok? :D)
Which Expenses Can be Claimed Off Your Tax Bill
The general rule is that if an expense is ‘wholly and exclusively’ for business then it is tax-deductible. It’s more complicated in practice. Food and drink is almost always disallowed, so is clothing. Travel is almost always allowed, and so are a proportion of working from home expenses.
There are generic rules, and then rules when it depends on your circumstances and that of your business. For example, food and drink is usually not allowed however if you are an events organiser and providing food and drink is part of your service to your clients, then it becomes an allowed expense.
Also remember that the rules for sole traders can be different to those for employees, limited companies and limited company directors, so what applies to your friend may not apply to you.
Capital items are costs that are longer term that are not part of the day-to-day running of your business. Examples are your laptop, camera, desk, printer, software and web design.
It’s easy to enter them as expenses if you don’t know. It’s ok to have a column in your spreadsheet for capital items to make things easy.
Like with expenses, there are rules about whether you are allowed to deduct an item from your business income and there is an annual allowance (AIA) which changes each year.
Capital items can be brilliant if you’re a new business and you fancy a tax refund. Email me darling!
What You Can Do With A Loss
This is not about whether you lost your favourite T shirt when you rolled down the hill during the summer and had an unfortunate accident when you didn’t stop in time and ended up in the pond.
It’s about have you made a negative profit in your business/made a loss?
If you have, it’s very common and unless you’re an established business or were a really bad spendthrift, it doesn’t mean you’re going to fail. As a sole trader there are a couple of easy options (there are others but more complicated).
1. If you have paid tax in another way in the same tax year (e.g. you have a job) then you can ‘offset’ the loss against that tax. If the tax paid is more than the loss, you get a refund. WOOHOO! (I love it when I can make this happen for clients)
2. You can also carry forward the loss to apply against next year’s profits (so your profit for the next tax year would be lower).
You have to apply all the loss whatever you decide and also pay attention to your personal income/National Insurance Class 4 tax allowance (the amount you’re allowed to earn without paying tax). That’s less of a pain in the ass than it sounds but getting help might be a good idea. Just sayin’.
Yes! You can do your tax return yourself with help
Even someone who has problems with numbers can do their own tax return with help and stay sane and stress free.
It’s good to be familiar with the process even if you decide to have someone do it for you as legally it’s your responsibility.
(That’s why I have clients who have fully fledged accountants. Do you want to know how I help clients who have accountants?)
Are you ready to get this done right, not to fudge it, not to ‘make do’? It’s your business, do you want your tax return and money to be what you compromise on?
Do you desire to do your tax return easily, with clarity and confidence?
Contact me to have a chat about how I can make it happen for you.
Julieanne, a professional declutterer, invested in her business and decluttered her mind of ‘what do I do?’ tax return stress in luxury surroundings, with cake.