Income tax self assessment

Andy Hardy, development director at TaxCalc.com, explains the basics to filing your HMRC (Inland Revenue) personal tax return.

• 9 million people have to complete a self assessment tax return and send it off to HMRC (HM Revenue and Customs, the new name for the Inland Revenue). As a self employed person, you will be one of them. Self assessment means just that. It is your responsibility to complete your tax return, calculate the tax and pay it on time

• If you are self employed, you will need to complete an individual (SA100) tax return. If you run the business in partnership, then each of the partners will need to complete an SA100 return, but a partnership (SA800) return will also be needed

• If the business is run via a limited company, then you will complete an SA100 return plus a company (CT600) tax return. The filing deadline for a company tax return is 12 months after the accounting date (the end of the period that your accounts are made up for)

• A self assessment tax return can be completed by hand or you can use software to produce the return for you and then file it online. Commercial software provides much more assistance in...

• If you opt to handwrite the return you must file it by 31st October 2008. If you file it online, you have until 31st January 2009 to file it

• Any tax you owe must be paid by 31st January 2009; this is called your “balancing payment”. However, as a self employed person, you are likely to have to make “payments on account” for the current tax year as well. You make 2 payments on account and each is 50% of the tax due for the previous tax year

• This means your first tax bill may be 150% of the tax due: this can come as a nasty surprise, so it is advisable to prepare your tax return early and use commercial software which will do the calculations for you to help you plan your cash flow and set the money aside

• As an example, if the tax you owe for your first tax year is £5,000, then you will have to make the following payments:

- 31/1/09 £5,000 (balancing payment)
£2,500 (1st payment on account)

Total £7,500

- 31/7/09 £2,500 (2nd payment on account)

• In your second tax year, the 2 payments on account that you have made will be deducted from the balancing payment amount and there will be new payments on account

TaxCalc.com is a provider of tax software solutions.

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By Andy Hardy  on   Nov 14,2008

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Keywords

tax    self assessment    tax software    tax return   

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