With the January 31st self-assessment tax deadline rapidly approaching, Phoenix Pay thought it might be useful to present a three-part guide to completing a self-assessment tax return. This is part one and will discuss the following:
- Who needs to complete a self-assessment tax return?
- What are the benefits of filing your assessment early?
- How can Phoenix Pay help you to do this with greater ease?
First up: do you need to complete a self-assessment tax return?
Chances are, if you’re reading this article, you already know that you need to complete a self-assessment tax return but, for those of you who aren’t sure, there are some criteria that you need to fulfil to warrant completing this process.
If you are any of the following then you must complete your tax return, online, by the 31st January:
- If you are self-employed and earned more than £1000
- If you are a company director, partner or founder
- If you receive income from overseas
- If you earn in excess of £100,000 a year
- If, before tax, your savings or investments accrue to more than £10,000
- If you’ve earned more than £2500 in untaxed income
- If you earn over £50,000 and are the highest paid earner in a household claiming child benefits
If you are still unsure, you can look at the Gov.uk website where there are more detailed guidelines and even a set of questions designed to work out whether or not you are required to complete a self-assessment tax return.
What are the benefits of completing your self-assessment tax return early?
As with all things in life, it’s often best to be ahead of the game so that you have time to prepare for and deal with any eventuality. The deadline for completing the online self-assessment forms is January 31st but, it’s worth nothing, that the deadline for paying your tax bill is also January 31st. So, if you leave it to the last minute and discover that the worst case scenario has happened and you’ve over-spent, for example, then you can face fines for missing the payment deadline; by completing the forms earlier, you will have bought yourself time to find a solution.
HMRC make millions in fines each year because of people putting off doing their tax return. In 2018, a huge number of people missed the deadline – 745,588 to be exact – and they will have each been fined £100 for this misdemeanour. If they didn’t pay within 30 days then 5% was added on top of their taxes owed and they were given an additional 90 days to pay; after that, they would have incurred a £10 a day fine. It doesn’t sound like a lot but it certainly adds up when you’re already struggling to pay a tax bill. However, it’s fair to assume that the majority of people who miss this deadline do so because they delay in completing the forms and, so, by completing yours early, you can remove all of this extra stress and worry. Especially when you also consider that HMRC have had issues with staff going on strike, their online services failing (in 2018, 6% of returns filed were done on the deadline day so imagine the servers struggling under the weight of that), and phone lines being blocked with last-minute, panicky questions. By completing your tax return early, all of this can be avoided.
It is also worth noting that you cannot just turn up online and file a self-assessment tax return; you have to register and that can take a while to be processed. Often, at quieter times of the year, this can take a fortnight and involves a two-part process that requires a pin number sent to you, via the post, by HMRC. So, you can imagine how much longer this process might take at busier times of the year. Again, this process involves speaking to a phone operator at HMRC and with their own data reflecting a decline in the number of calls actually answered and an increase in wait times overall, planning ahead is essential!
So, how can Phoenix Pay help you avoid all of this chaos?
Phoenix Pay specialise in being real-time accountants which means that you are constantly kept up to date with your spending, income, and what you owe. Whilst the more traditional, ‘grandpa’ accounting firms offer an annual review, we offer an ongoing review meaning that you are always prepared with the most up-to-date information to meet deadlines with reliable numbers. Our services can even keep you informed about what salary you can afford to pay yourself or what’s available as a dividend, so you can avoid over-extending yourself or the business and avoid nasty shocks when the tax deadline rolls around.
Furthermore, our software was built with you, the business owner, in mind so you don’t need to be a financial or accounting expert to understand the information being presented. Completing a self-assessment tax return can be complicated further by having to both understand the question they’re asking you and understanding what piece of information or evidence it is you need to provide to give an honest, accurate answer. With Phoenix Pay, this information is always available and clearly presented so you don’t need to forage through paperwork or receipts to find it – greatly decreasing the stress of completing a tax return.
Hopefully this has answered a few of your questions about self-assessment tax returns and how we at Phoenix Pay can make your life a lot easier when that time of year rolls around. Being prepared with our services and completing your tax return early means that you can spend more time focusing on the more important day-to-day aspects of running your company whilst putting your finances to the back of your mind; the information will always be there, ready for when you (and the tax man!) need it most.