How to Prepare Your Self-Assessment Tax Return

With the start of a new tax year just around the corner, it’s a good idea to start getting your finances in order so that you don’t have a last-minute panic.

Last year a record 11.7 million customers submitted their tax returns to HMRC on time, with 861,085 submitting it on the deadline day. According to ‘Which?’, in a November 2022 survey, 31% of people who had filed a tax return before, said the thing they disliked most was worrying about making a mistake.

But it really doesn’t need to be this difficult, particularly if you keep your finances up-to-date throughout the year. Our team supports thousands of freelancers and small business owners to manage their accountancy online, including their Self-Assessment Tax Return.

Here we explain more about what’s involved.

Who needs to complete a Self-Assessment?

You will normally need to complete a self-assessment if you are self-employed or a director / shareholder of a limited company. We can register you for self-assessment and prepare and submit your tax return on your behalf. This ensures everything is done correctly and makes life easier for you. With a dedicated accountant by your side, all you have to do is pay your tax bill using the verification HMRC sends when they confirm receipt of your tax return.

What to include in a tax return?

To complete your tax return, it is necessary to document all your income sources over the year. If you are a company director and your only income is a salary from your business, that’s what should be recorded on the tax return.

If you’ve received dividend payments or income from other investments and shares, or an asset such as a rental property, this will need to be detailed too, as will any pension contributions, state benefits and capital gains (such as a property you’ve inherited and disposed of) and lump sums such as redundancy payments.

How is tax calculated?

The amount of income tax you must pay is based on types of earnings you have, above the personal allowance of £12,570 for the year ended on 5th April 2023. Your employment income is then taxed according to which ‘Band’ it falls in to:

Up to 5th April 2023:

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From 6thApril 2023, most of the bands will remain the same, except for the additionalrate band. The threshold for which this applies will reduce from £150,000 to£125,140, the income levelat which an individual will also not have any Personal Allowance either.  

From 6thApril 2023:

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Dividendsare taxed at a separate rate to earned income (employment and self-employment income. The following rates for tax on dividends apply up to 5thApril 2023:

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From 6^thApril 2023, since it is the same band, as above the threshold for Additional Rate Tax will reduce from £150,000 to £125,140. In addition, the Dividend Allowance of £2,000, will reduce to £1,000.

Deadlines and penalties

Below are the deadlines for submitting your Self-Assessment Tax Return for the year ended on 5th April 2023. If you’re late, HMRC will impose an automatic late filing penalty of £100, plus potentially other charges and interest, depending on when it is submitted.

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In addition, you will need to submit your online return by 30th December 2023, if you want to request HMRC to automatically collect any tax from your wages or pension.

Last year, a total of 22,060 people submitted their tax returns between 24th and 26th December 2022, with 141 filing between 23:00 and 23:59 on Christmas Eve! We’re sure you’ll agree that it’s much better to be organised in advance so that you can forget about taxes into the summer months, before it you even get to the festive period.

For more information on any aspect of limited company accountancy or help with preparing your tax return, please get in touch.

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