How to File Self-Employment Tax in the UK?

Self-employment is easier said than done, and comes with a lot of responsibility. You must take care of your employees, manage your money, pay your taxes, and file your own tax returns.

Whether self-employed or not, individuals must pay income tax regardless of their source of income. However, self-employed workers often do not file their taxes due to regular accounting procedure.

What steps do I need to follow to file self-employment tax in the UK?

  1. Complete the self-assessment form provided by HMRC.

• You must notify the tax collector of your self-employment status by registering for the self-assessment on the HMRC website.

• Keep the deadline in mind: you have until October 5 following the end of the fiscal year in which you registered to register or face fines. Note that the budget year begins on April 6. So, if you started working on your own in February, you have eight months to sign up.

• Your UTR-a letter should arrive within ten days with your unique 10-digit taxpayer reference number (UTR). When it comes to paying taxes, you’ll need this.

• Your online account – HMRC will set up your online self-assessment account so you can file your tax return when it is due.

  1. Register for VAT.

• You can also register for VAT while you’re at it. Consumers pay value added tax on most, but not all, goods and services in the UK, which is currently set at 20%.

• If your taxable income exceeds £85,000 in a tax year, you must register with HMRC. It is completely up to you if you earn less.

• You will receive a certificate verifying your VAT number, as well as important dates to file your first return and payment.

• Your certificate may take up to a month to arrive, during which time you will not be able to charge or show VAT on your invoice. You will still have to pay the tax collector.

• Inform your consumers that you will charge more to pay the tax during this period and will reissue invoices once you receive your VAT number.

Registering for VAT gives you a higher reputation and professionalism, as well as more privacy when it comes to your income.

Fill out your tax return

The tax return is divided into two sections. Most of it covers earned income, pensions, charitable contributions and benefits. Supplemental pages for people with income to report through self-employment, real estate, investment earnings, being a director of a company, and working abroad.

You have the option to file your return online or on paper, but different deadlines apply. The government also plans to phase out paper returns as part of its Making Tax Digital initiative, due to launch in April 2022.

How do I complete a tax return online?

Here are our step-by-step instructions on what it all means and how to do it if you’re filing online:

• Go to the “submit your self-assessment” page after logging in with your Government Gateway user ID. When you first register for online services, you only have to enter your UTR number once.

• Make sure your personal information is up to date, such as your residence and marital status, as well as your date of birth, as this could affect your allowances.

• Follow HMRC’s example: the system reacts to the information you provide, so items that are not needed will be removed. You will not be able to progress unless you answer HMRC’s questions.

• Complete your return – Areas that need to be completed will be provided to you based on the answers you provide. When you press “next”, your progress will be stored, so don’t worry if you need to search for lost papers while offline.

• Enter your costs – There are some strict requirements here: They must be tax-deductible business expenses. See our guide for freelancers to find out more about what you can and cannot claim as costs.

• Employed people must have their P60 available, as well as their P11D if they receive any employment benefits during the year, such as a company car or medical insurance. No calculations required; fill in the figures directly from these documents.

• Send your return to HMRC; You will receive a confirmation after you have done so. Now all you have to do is make sure you pay your taxes on time, or set up a payment plan, before the January 31 deadline. If you can’t remember how much you owe, go to the site.

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