The freelancer’s guide to filling out a self-assessment tax return

By Philippa Guy

The dreaded self-assessment tax return is creeping its way back. Luckily we've made it easier.

November… the time of the year again when all the wonderful benefits of being a freelancer pale into insignificance as the dreaded self-assessment tax return looms. This guide looks at what you need to know and ideas to make the whole process easier, so you can face Christmas without any added stresses of taxes.

Who has to fill in a self-assessment tax return?

If you are an employee, you will pay taxes and National Insurance through the PAYE (Pay As You Earn) scheme, which is taken automatically from your wages monthly. However, if you are self-employed, you will not be part of a PAYE scheme so you have to fill in your own tax return every year. This is called a self-assessment tax return and it means that HM Revenue and Customs (HMRC) can collect income tax from your earnings. You will also have to fill in a self-assessment tax return if you are employed but earn extra self-employed income, or if you are not self-employed but make over £2500 a year in savings and investments or renting out a second home.

When is it due?

The tax year runs from 6 April to 5 April the following year. You can fill in your tax return as soon as the tax year ends on 5 April. The deadline for filling out a paper tax return has now passed (31 October), but you have until 31 January 2017 to complete an online tax return for the tax year April 2015-April 2016. Make sure you stick to this deadline if you want to avoid being charged a £100 penalty for a late tax return!

This is my first time filling out a self-assessment tax return!

If you haven’t done so already, you will need to register as self-employed with HMRC online on the website: This will automatically enroll you for self-assessment online. You will then get a letter with an activation code, which will allow you to log in to your online account and create a user ID and password. You will also be given a 10-digit Unique Taxpayer Reference (UTR) that links your account year by year, so keep this code safe! Your account will allow you to file your tax returns and calculate the amount of tax that you owe, as well as containing lots of advice and tips.

What documents do I need?

Firstly, make sure you gather all the documents needed to fill in the self-assessment tax return. You will need details of all the income that you receive, which includes the interest you have earned on savings accounts (you can request this yearly amount from your bank or building society) and dividends from any investments that you hold. If you work both as a freelancer and an employee, you will need a P60 form from your employer to show how much tax you have already paid on your salary. If you have left your job within this tax year, you will need a P45 from your last employer. You might also have a P11D from your employer if you have benefits such as a company car. You will also need details of your expenses as a freelancer, such as running costs of vehicles or household bills.

Filling out the self-assessment

Once you have logged in, you will access your tax account home page and you can then start the process of filing your return. After giving your details, you will be asked to ‘tailor your return.’ This is where you will be asked questions about your employment and any salary you may have been earned; and about income from investments or interest from savings. It’s here that you will need a P60 if you are also an employee or a P45 from your previous employer if you have recently left your job.

You will then fill in the actual tax return, giving details your self-employed income and outgoings for the tax year. You can choose to enter your expenses as a single figure or as a detailed breakdown. Then your net profit (your income minus your expenses) will automatically be worked out. You don’t need to complete your tax return all at once – there is an option to save your work and come back to it later. By the end of filling in the return, you will know how much tax you owe and will have a clear breakdown of how this amount has been calculated and when it is due.

What are allowable expenses?

When you are self-employed, you will have running costs to your business that you can claim as allowable expenses. You can deduct these amounts from your income to work out your taxable profit. These must be expenses that help you earn income and include travel costs, office supplies, phone bills, insurance, the costs of running your business premises or energy bills if you work from home. HMRC provide a full list of expenses here. Remember to keep detailed records of all these costs.

Paying your tax bill

Your tax bill is normally split across two payments every year and these amounts are due by midnight on 31 January and 31 July. With the onset of Christmas, it can be easy to forget that you will have to pay half of your tax bill by the end of January. Make sure you put some money away during the year so that this does not come as a shock! Some people have a separate savings account, into which they regularly deposit money, or it is possible to set up a budget payment plan with HMRC, which means you can pay a set amount weekly or monthly by direct debit towards your tax bill. Other options including paying the amount online or by telephone banking, debit card or cheque through the post. Your tax bill will have details of the HMRC bank account or visit here  Visit your online account to check that your payment has been received as there will be fees for a late payment.

It will get easier every year!

When you first begin as a freelancer, you might adopt a slightly haphazard approach to filing paperwork, leading to lost receipts for expenses and not keeping detailed accounts of your income! The stress and hours spent searching for paperwork this year will hopefully be a great incentive to adopt a more organised approach for next year. Update your accounts weekly or monthly so you know exactly what you are earning and create files for expenses and any other forms that you might need. As you hone your organisational skills, filling in your self-assessment tax return hopefully will become a less painful experience!  

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