Self-assessment is a system HMRC uses to collect income tax. Tax is usually deducted automatically from wages, pensions and savings, but if you have other forms of income you may need to report them in a tax return.
Is self- assessment too strenuous to do it yourself? High street accountants will prepare and complete the forms for around £250, while budget online services start as low as £50. But how do you find an accountant, what should you pay and what do you get? Having a good accountant is like having a good Doctor who will keep you happy and healthy!
The good news is that you can claim the cost of your accountant's fees – for preparing your tax return, for example – as a tax deduction.
Anyone who works for themselves, whether that’s as a sole trader, a freelancer, a contractor or running their own business, will need to complete a self-assessment tax return. For many people this is a daunting task, for they fear that they will make a mistake or simply do not know what to include.
For those working in the medical sector from Consultants, Hospital Doctors and General Practitioners to GP Locums, Surgeons and other Specialist Doctors need specialist knowledge to minimise specific liabilities.
HMRC will not necessarily prompt you to complete a tax return, so you need to be aware of when you may need to complete one. For example:
- Do you have untaxed ad-hoc income of more than £2,500? This could include things like locum fees, crematorium fees and form-filling fee
- Are you claiming employment expenses, such as annual subscriptions to the BMA, MDU or GMC, of more than £2,500 a year?
- Do you have savings or investment income of more than £10,000?
- Do you receive rental income from a property of more than £2,500?
- Do you receive dividends from shares and pay tax at either the higher or additional rate of tax?
- Is your total income more than £100,000?
- Was your or your partner’s income over £50,000 as one of you claimed the child benefit?
- Are you domiciled outside of the UK?
If the answer to any of these questions is yes, you are legally required to submit a tax return and must register for self-assessment. Please note this list is not exhaustive.
If your needs are relatively simple, and you're happy using email and post rather than seeing someone in person, then the online services are worth trying. However, these websites the charges could be highly misleading. They look attractive with a low upfront cost, but then lots of add-ons.
A Google search elicits innumerous services promising "We won't be beaten on price", but the first thing to remember is that in the UK anyone can call themselves an accountant, whether they have qualifications or not. So check the firm's status. How many of the staff are members of the Chartered (ICAEW) or Certified (ACCA) professional bodies?
A late tax return is subject to the following penalty regime:
- An initial £100 penalty applies even if there is less than £100 tax to pay or the tax due is paid on time
- After three months, additional daily penalties of £10 per day – up to a maximum of £900
- After six months, a further penalty of 5% of the tax due or £300 – whichever is greater
- After 12 months, another 5% of the tax due or £300 – whichever is greater. In more serious cases, the penalty after 12 months can be up to 100% of the tax due
Each of these penalties is in addition to one another means a tax return filed a year late could face penalties of at least £1,600 – and this could escalate depending on the level of tax due. You could also be liable for interest and late payment penalties on top if you pay any tax due late.
Although more than 80% of taxpayers choose to file their tax returns online, which allows them to file their 2016 tax returns by 31 January 2017, please bear in mind that it clashes with the festive period. Some taxpayers may leave their tax returns until the New Year, but why not get yours done ahead of the holidays? Filing in advance means you can eat, drink and be merry over Christmas, without having to stress and worry about a looming tax return deadline.
By preparing your records in advance for your tax return, you will equip your accountant with plenty of time to check for any tax planning opportunities you and your business may be eligible to receive; taking full advantage of any tax reliefs and allowances. Once your tax return is ready, your tax liability can be calculated.
Your income tax liability for your 2016 tax return is due by 31st January 2017.
HELP IS AT HAND
As delaying your financial affairs can be severe but your time may be tight because you are busy concentrating on the day-to-day running of your business, why not let the experts at your local Tax-Link Chartered Accountants & Tax Advisors look after your tax affairs and responsibilities.
Tax-Link Chartered Accountants & Tax Advisors is able to provide you with the following services:
- Register you with HMRC for Self-Assessment and any other area of tax applicable, such as VAT or registration as an Employer
- Prepare your tax return for you and consider any tax planning opportunities
- Calculate your tax liability and advise you of the amount and due date of any payments to be made
- Review HMRC correspondence and liaise with HMRC on your behalf.
Contact us today to find out more about what we can do for you on 02085401920 or email email@example.com.