If you are self-employed, then the end of the tax year is an important time. All self-employed people in the UK (that includes those who do freelancing) need to register with HMRC and submit end of year tax returns.
Did you know, you can significantly reduce your self-employed tax bill by off-setting legitimate business expenses – something we cover here too.
In case you are confused about what you need to do as a self-employed worker for tax purposes we’ll walk you through all of the main points with a quick Q&A now…
When Is The End Of The Tax Year In The UK?
The tax year in the UK ends on the 5th April every year.
Does Your Own Financial Year End Have To Be 5th April?
No, you can choose a different date for your own accounting period year end. Choosing an earlier date may give you more time to fill out your self-assessment tax return for the current year.
When Do You Need To Register For Self-Assessment?
You need to register for self-assessment by the 5th October following the end of the current tax year.
For Which Period Do You Need To Pay Tax?
If it’s your first year in self-employment then you’ll pay tax for the period since you set up business until the end of the tax year. In that first year you probably won’t need to pay for a full year. After that, you’ll usually pay tax on a period of a full twelve months.
When Do You Need To Complete Your Self-Assessment Tax Return?
The deadline for a paper return is on the 31st October after the tax year ends. Alternatively you can leave it until the following 31st January in the following year if you want to fill out your self-assessment tax return online.
When Do You Need To Pay Your Self-Assessment Tax & How Much Will You Owe?
By the following 31st January in your first year of self-employment. If you filled out a paper return in October the HMRC will work out how much you owe. If, however, you fill out your tax return online, the the system’s software will calculate how much tax you need to pay.
After your first year self-employed, you may also need to make ‘payments on account’ if you owe more than £1,000. These payments apply to the current tax year and are paid in two installments – half by the 31st January and the other half six months later by 31st July.
The amounts of your payments on account are based on your tax bill from the previous year, so if you make more money than you did last year you may need to balancing amount on the following 31st January.
Which Business Expenses Can You Offset As A Self-Employed Worker?
Keep track of all of your business expenses because you may be able to use some of them to reduce the amount of tax you owe at year end. Here’s a list of some eligible and non-eligible businesses expenses that you may be able to offset against your tax bill as a self-employed worker.
Example Eligible Expenses
- Business premises running costs (or home office costs, if you work from home)
- Petrol used for business activities
- Vehicle Insurance
- Vehicle Tax
- Employees wages
- Breakfast & Dinner costs when working away from home
Example Non-Eligible Expenses
- Your own wages
- Your own NI contributions
- Travel costs from home to work
- Alteration costs for your business premises
If you are a sole trader, then you may be able to use simplified expenses for some of these business costs.
What Happens If You Are Self-Employed & Don’t Pay Your Tax Bill?
If you fail to fill out your self-assessment tax return or pay the amount that you owe on time, then you could face penalties of £100 or more from the HMRC.
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