Everything you need to know about self-assessment

Each year,  more than 12 million people are expected to file their self-assessment tax return, yet for many, the process feels like a real chore. In this guide, we’ll explore the essentials of self-assessment, from what it is, who needs to file a self-assessment tax return, to top tips on how to handle it like a pro.​

Self-assessment is HMRC’s tax system to collect income tax from those who don’t have their tax automatically deducted - it requires taxpayers to report their income and pay their tax bill to HMRC.​

You may need to file a self-assessment tax return if you are one of the following:​

If you’re an employee but also earn more than £1,000 from any freelancing or contracting work, you must file a self-assessment tax return to report your earnings. ​

At Beany, our sole trader package takes the hassle out of self-assessment tax returns, so you can focus on growing your businesses. Whether you are just starting up or scaling up as a sole trader, we provide affordable accounting services tailored to your needs. Book a call with us and discover how we can help you.​

The tax year runs from 6th of April to 5th of April. The 24/25 tax year therefore runs from 6 April 2024 to 5 April 2025.​

You must register with HMRC by the 5th of October following the end of the tax year in which you began earning untaxed income. This ensures you receive your UTR (Unique Taxpayer Reference) in time to file your return. ​

If you file your self-assessment tax return online, the deadline is 31st of January following the end of the tax year; however, if you decide to submit a paper tax return, the deadline is 31st of October following the end of the tax year.​

It’s important to note if you didn’t file your self-assessment tax return on time, you could face fines or penalties. For example, you could potentially pay £100 for up to 3 months late; additional daily fines after 3 months; and interest charges on unpaid tax. ​

Check out our key dates calendar for other important dates. ​

There are 2 installments for paying your self-assessment tax:​

Payments on account are advance payments made towards your next year’s tax bill. They’re calculated based on your previous year’s tax liability, excluding any amounts paid for capita gains or student loans. Each payment is 50% of last year’s tax bill. We have a separate blog on payments on account if you’re interested in this topic.​

If you’re new to self-employment, your first payment (due 31st January after your first tax year) will include 100% of your first year’s tax and 50% of your second year’s liability, so it’s essential to plan for this in your cashflow.​

Struggling with your self-assessment tax return? Let Beany handle it for you. Our accounting experts will take the stress out of filing so you can enjoy the peace of mind. Book a call with us to get started.​

Accountants help make sense of your finances and prepare your accounts and tax returns for you. You’ll want to ensure you are paying the right amount of tax, have an idea of the size of your bill and when you need to pay it, as early as possible.​​​

If you’re concerned about fees for accounting services, here are two tips:​​​

Do not underestimate the difference to your overall tax position that an accountant can deliver!​

Go through your debtors (people who owe you money). If you’re sure they are a bad debt and will never pay you, write them off now.​ You don’t want to pay tax on income you’re unlikely to receive.​​​

Is your mileage logbook up to date? Without this you won’t be able to claim a deduction for business travel. Take a look at our article which provides more detail on claiming for motor vehicle expenses.​​

Make sure that you are carefully recording all your creditors (people the business owes money to).​ Recording all liabilities accurately can reduce your HMRC self assessment payment.​

Ensure you have a record of all the donations to charity you have made during the tax year, and also all pension contributions. ​​

In the lead up to the end of the tax year (5 April) it might be worth speaking to a financial adviser to see if it’s worth making any additional contributions to your pension. ​​

Think seriously about using a bookkeeper. If you’re not confident about what goes where, or are as time-poor as most business people, then a bookkeeper can help input information into your system correctly. You may be surprised how little it can cost – what takes you four hours may take a bookkeeper only two. It will certainly free up your time to do something more enjoyable. Do some research online or ask your colleagues/mates – there is no shortage of good people out there.​​​

Beany offers this service at £37.50 plus VAT per hour.​​​

Using an accounting software package that does what you need is vital to businesses. If you haven’t updated for a while, or are new to business, you’ll be astonished at what’s available these days. The start of a new financial year is the perfect time to switch to Xero (or other accounting software). Almost all of our clients use Xero. Select a Xero pricing plan that works best for you (you can easily upgrade or downgrade later if needed).​​​

The Xero Cashbook or Xero Ledger (available only through accountants) may be perfect if you don’t need all the bells and whistles.​​​

Do you need all those entities and tax structures? Maybe you need two companies and three trusts – maybe you don’t.​​​

Although there are short–term costs to close these down, it is well worth it to stop ongoing compliance costs.​​​

New or upgraded business software seems to be available every day – is there anything you can automate to save time and money? Can your apps be integrated into your accounting system, or with each other?​​​

Colleagues and friends may provide useful nuggets of information.​​​

Business can get complicated and when it does, accounting records and systems often follow suit.​​​

Only use multiple codes for different items if the different codes genuinely help you run your business. Sometimes more information leads to poorer decision-making or less business agility.​​

Set up a system for recording your business income and expenses directly, in one place.  Some businesses keep paper invoices, which they then enter into a spreadsheet, which then gets sent to an accountant, who inputs it into their accounting software. If this works for you and your accountant, that’s fine, but there are more efficient ways of doing this.​​

If you’re adding complexity – which will, inevitably, add cost – then make sure you’re getting a good return. Sometimes it’s worth it, sometimes it’s not.​​​

Digitise all important paper documents and save them, along with your relevant electronic documents, in an orderly way. Key documents to save include:​​​

Ideally, you’d save them to your accounting system (e.g., Xero), but there are alternative solutions, such as Google Drive. Whatever you choose, aim for a product that is easy to use and secure, yet shareable.​ ​​

It’s also helpful if you add detailed descriptions on the transactions – your accountant will appreciate it!​​

At Beany, we're committed to your business' success. Our core package covers your year-end compliance, with one fixed cost split over 12 months. This includes your end-of-year accounts and tax returns, tax minimisation, unlimited support for day-to-day queries and more. We also have a wide range of other helpful services to help you as you start out or as you grow, such as bookkeeping, VAT returns, payroll and more. Book a call for a free chat about your accounting requirements.​