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Your Guide to Understanding Self-Assessment Tax Returns

Let's talk tax!

It’s that time of year again, you’ve had that email from HMRC asking you to complete a tax return this year.

Tax time can be a bit of a headache, right? But hey, understanding and getting through it is super important. So, grab a cuppa, and let's dive into the why, how, and what-ifs of this whole tax return thing, in a way that's easy to understand and maybe even a tad enjoyable.

Why Should I Bother with a Tax Return?

Okay, so here's the deal: If you're self-employed, running a business, making money from renting out property, or just generally earning from more than one source, chances are you've got to fill out a tax return. It's how the tax man keep tabs on what you're earning and make sure you're paying the right amount of tax.

What's in It for Me?

Believe it or not, there's a silver lining to this tax cloud. Filing your tax return isn't just about ticking off a chore; it's a chance to claim back some of your hard-earned cash. By declaring all your income and any expenses or deductions you're entitled to, you might just end up with a nice little tax refund.

Even if you’re not lucky enough to get a refund, it’s always nice to get it filed as early as possible so you know what you need to pay. It’s always tricky making sure you’ve got the cash available so soon after Christmas but getting it done early means you can stash it away throughout the year to give you the peace of mind that you’ve got this covered.

Do I Need to Hire an Accountant?

Now, here's a question that pops up a lot: Do I really need an accountant for this stuff? Well, it depends. In fact, the original format of a Self-Assessment was for the tax payer to be able to complete the forms themselves and effectively work out their own tax liability.  

If your tax situation is straightforward and you're pretty clued up on the rules, you might be just fine going solo. But if things start to get a bit hairy with your finances or you just can't face the paperwork, bringing in the pros could save you a lot of stress.

An accountant or as HMRC call us, agents, will assist you compiling everything you need for the tax return, advise where you might claim tax relief and where you can’t. The importing thing is that you speak to your agent about anything you think might be relevant, this includes income and any costs.

Things to Think About if You're Going It Alone

If you're thinking about tackling your tax return solo, there are a few things you'll want to consider. First off, get to grips with the tax rules that apply to you. Then, get all your paperwork in order and familiarise yourself with the tax return form. Taking it step by step and staying organized will make the whole process way less daunting.

 What information will I need?

Details of all income from employment, self-employment and casual work. You should have received a P60 from any employment, you’ll need this to prove what tax has already been deducted. Income from self-employment can be demonstrated by a set of accounts, these will show your income and costs along with any profit (or loss) you have made. You should keep records of any casual work you undertook as you might need to declare this.

You’ll also need to establish all the other income you might have received through the tax year, things such as savings interest, dividends (from shares or your own company), pensions, any other untaxed earned income. Some money received as a result of compensation claims may also be taxable, this usually relates to interest paid on mis-sold products (like PPI).

Is there anything else I need to declare?

Possibly. Everyone is different and we’d always recommend you as for help if there is anything you are unsure of. 

The most common things we see missed are income from properties like rentals and second homes, we occasionally find that any Capital Gains have not been declared on time either. Another regular omission is dividend income from shares and investments, especially if you have a number of separate accounts. 

Surprisingly, many underclaimed expenses, sometimes charity donations are forgotten or allowances for working from home.

A couple of more unusual things to think of though, income from Cryptocurrency will need to be considered and declared. But only once it’s been realised, that is, you have real money from your activities. How it’s earned also matters, did you mine it? Or was it simply as a result of trading?

Solar PV exports & energy reduction schemes also might need to be considered. If you simply sell your excess energy back to a purchaser (like your energy provider) through a FiT or SEG scheme then you have nothing to declare. However, income from energy reduction schemes, Virtual Power Plants or non-SEG schemes might need to be considered. You’ll need to work out how much actual income you received from these activities, this doesn’t include points or bill discounts.   

How to Actually Do It

Alright, let's break it down. First up, register for Self-Assessment online access with HMRC if you haven't already. From declaring what you've earned to claiming any expenses or deductions, take your time and double-check everything to make sure it's spot on.

Oops, Common Mistakes to Avoid

Even the best of us can slip up when it comes to tax time. HMRC don’t like mistakes and errors but they do happen, how you deal with it will be down to what has happened. Firstly, don’t panic! Watch out for things like forgetting to declare all your income, missing out on expenses you can claim, or leaving things to the last minute and risking penalties. Stay sharp, and you'll breeze through without a hitch.

Wrapping It Up

Phew, we made it! Navigating UK Self-Assessment Tax Returns might not be everyone's idea of fun, but armed with a bit of knowledge and a can-do attitude, you've got this. Whether you're flying solo or bringing in backup, understanding the ins and outs of tax returns is your ticket to smooth sailing through tax season. Feels good doesn’t it?

If you're stuck or don't fancy completing it yourself, we're here to help!

If you just need some advice but are happy to complete the return yourself, our advisory service is ideal! You only pay for the help you need.

If your feeling overwhelmed, have more complex matters or just want us to take the hassle away from you, we can do this for a fixed price. 

Call or WhatsApp us on 01908 597094