Whether you are self-employed or run a sole proprietorship, you must file a tax return. You can do this either online or in the traditional paper form. It is your responsibility to ensure that your tax return is accurate, submitted on time and contains no omissions. For this reason, many business owners choose to hire professionals to prepare their self-employed tax returns, rather than doing it themselves.
What are the tax thresholds for self-employed people in the UK?
The rate of tax depends on your income and these thresholds apply:
- 20% tax – for income between £12,570 and £50,270
- 40% tax – for income between £50,271 and £150,000
- 45% tax – for income above £150,000
If you are a sole trader, you will need to file a self-assessment (tax return). This includes all receipts and invoices for the tax year. It is therefore essential that you prepare the necessary documents, such as
Self-Employed Tax Returns: Self-Assessment
As a sole trader, you must file a self-assessment tax return. This return includes all receipts and invoices for the tax year. Before you complete your return, make sure you have the necessary documents, such as
- Sales records
- A breakdown of business expenses
- P45 and P60 documents (if self-employment was not your only source of income)
Tax is usually deducted automatically from wages, pensions and savings. If you have other sources of income, you must declare them on your tax return. Make sure you file your self-assessment on time to avoid penalties.
How to file a self-assessment tax return: Online or paper form
If this is your first tax return, you’ll need to apply for a Unique Taxpayer Reference (UTR) number. You then have two options for submitting your return:
- Paper – deadline is 31 October
- Online filing – deadline is 31 January
For paper returns, start by downloading form SA103S or SA103F from the HMRC website. Complete all the required fields, including your personal details, UTR number and financial details of income and allowances. Once you have completed the form, send it to HMRC.
If you choose to file online, you will need to register with HMRC’s online services. You will need your UTR number, which you will receive from HMRC. Once you have registered, log on to the system and complete all the sections of the return. The system will automatically calculate the summary, showing how much tax or National Insurance you owe, or whether you’re entitled to a refund.
At the final stage of filing your return, you will receive electronic confirmation that your return has been sent to HMRC. If you file your tax return as a self-employed person, you must declare all your income for the tax year. In the UK, the tax year starts on 6 April and ends on 5 April of the following year.
How do I pay my Self-Assessment taxes?
When you submit your Self-Assessment tax return, you will be told how much tax and National Insurance contributions you have to pay. You have until 31 January to do this and you can do it using:
- Online or telephone banking
- CHAPS (Clearing House Automated Payment System)
- Business debit or credit card payments
Alternatively, you can pay your tax bill in person at a bank.
Self-Employment and VAT in the UK
As a self-employed person, you are subject to all VAT rules. This means that you must register for VAT with HMRC if your turnover exceeds £85,000 in the previous 12 months. You can also choose to register for VAT voluntarily if it is beneficial to your business. If you are unsure whether registering for VAT will benefit your business, it is best to consult an accountant.
A Good Accountant Is Key to Success in Self-Employed Tax Filing
Accounting for self-employed taxes and controlling the day-to-day bookkeeping of your business is a challenge that you do not have to face alone. Choose our office and we will take care of all these matters. Remember that any mistakes and failure to submit documents on time can result in a fine. That is why it is worth relying on professionals and being sure that your bookkeeping is done correctly.
