Before you do anything, have you registered as self-employed with HMRC? This is important because you will need to have a UTR (unique tax reference) to be able to file your tax return.
Having said that if you are self-employed it will be quicker and easier if you gather together and sort out all the relevant information before you start. Therefore it is important to get your books and records up to date so that you have a clear schedule of your income and expenses and any other income received in the year. Typically you should ask yourself the following:-
1. Are my books and records up to date.
2. Have I got details of any interest I have received on savings in a UK bank or building society? (except ISA’s)
3. Have I got details of any other income received in the tax year such as benefits, dividends, pensions?
4. Did I sell any shares or property in the tax year? If so you must calculate whether there is any capital gains tax due. In 2010/11 the first £10,100 of any capital gain is exempt.
OK. Now you are ready to begin.
Step one –Are you going to complete a paper return or file online?
Decide if you want to fill in a paper return or complete and file your return online. Filing online has many advantages, including longer deadlines, 24-hour access and instant tax calculations.
As well as using the FREE HMRC filing service you can now also purchase a number of commercial tax return software, at various costs.
Step two –Make sure you complete the right pages
Make sure you have got the right pages. For the self-employed you have a choice of two options.
1. Self-employment (full)
2. Self-employment (short)
Use the Self-employment (full) pages if:
• Your turnover was £67,000 or more (or would have been if you had traded for a full year)
• You have changed your accounting date
• The results of your accounts, made up to a date in the year to
5 April 2009, have been declared on a previous Tax Return
• You no longer prepare your accounts on the ‘cash basis’, but have changed to generally accepted accounting practice (GAAP) (also known as the ‘true and fair basis’)
• You provide services under contracts for professional or other services and these contracts span your accounting date
• You are a practising barrister (advocate in Scotland)
• Your business is carried on abroad
• You wish to claim Agricultural or Industrial Buildings Allowance, or other capital allowances for items apart from equipment and machinery
• Your basis period – that is the self-employed period for which you are taxable – is not the same as your accounting period
• You wish to claim ‘overlap relief’
• You are a farmer, market gardener or a creator of literary or artistic works and you wish to claim averaging
• You want to make an adjustment to your profits chargeable to Class 4
NICs (for example, because your profits include earnings as an employee).
Otherwise you can use the self employment (short) pages.
Step three –You are now ready to complete your return
Complete all the pages that you have to for your return. HMRC provide guidance notes to help you, including notes on the self-employment pages.
If you need more help completing your tax return, or need more general advice about Self Assessment, you can contact the HM Revenue & Customs (HMRC) Self Assessment Helpline on 0845 9000 444.
Step four - calculate your tax
Finally, calculate how much tax you owe. If you file your return online, this will be done for you automatically. If the total of your business profits and any other taxable income is more than your tax free allowances, you'll pay tax on the difference. The tax due will be included on your Self Assessment Statement.
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