How to File Self-Employment Tax in the UK?

Being self-employed involves more than just being your own boss. It requires taking on a significant amount of responsibility. You must oversee your employees, manage your finances, pay your taxes, and file your own tax returns.

Whether you work for yourself or not, you are required to pay income tax on any income you earn. However, self-employed individuals often fail to file their taxes on time due to the complexity of the accounting process.

So, what are the steps you need to take to file your self-employment tax in the United Kingdom?

Complete the self-assessment form provided by HMRC.
• Notify the tax authority of your self-employment status by registering for self-assessment on the HMRC website.

• Keep in mind the deadline: you have until October 5th following the end of the tax year in which you registered for self-employment to register, or you may face penalties. Note that the tax year begins on April 6th. Therefore, if you started working for yourself in February, you have eight months to register.

• Your UTR (unique taxpayer reference) number should arrive within ten days of registering.

• HMRC will set up your online self-assessment account, which you can use to file your tax return when it is due.

Register for VAT.
• You can also register for Value Added Tax (VAT) at the same time. Consumers in the UK pay VAT on most goods and services, but not all, at a current rate of 20%.

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

• You’ll receive a certificate confirming your VAT number, as well as important dates for submitting your first return and payment.

• It may take up to a month for your certificate to arrive, during which time you will be unable to charge or show VAT on your invoices. You’ll still need to pay the tax collector.

• Inform your customers that you will be charging more to cover the tax during this time and will reissue invoices once you receive your VAT number.

Registering for VAT gives you greater credibility and professionalism, as well as more privacy regarding your earnings.

Filling out your tax return

The tax return is split into two parts. The main section covers employment income, pensions, charitable contributions, and benefits. There are additional sections for individuals with income to report from self-employment, property, investment gains, being a company director, or working abroad.

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

How do I complete an online tax return?

Here is a step-by-step guide to what everything means and how to do it if you are filing online:

• After logging in with your Government Gateway user ID, go to the “file your self-assessment” page. You only need to enter your UTR number once when you first register for online services.

• Ensure your personal information is up to date, such as your address and marital status, as well as your date of birth, as this may affect your allowances.

• Follow HMRC’s lead: the system responds to the information you provide, so any unnecessary sections will be removed. You cannot proceed unless you answer HMRC’s questions.

• Complete your return – the sections you need to fill out will be based on the answers you give. Your progress will be saved when you click “next,” so don’t worry if you need to log out to find missing paperwork.

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