In the UK certain individuals need to file a tax return every year. HMRC provides a form wherein you proclaim your income and capital gains for a tax year. You can likewise utilise the form to claim reliefs and allowances. You send the form to HMRC through hard copy form or online.
Tax season has arrived. You will have to pay your self-assessment tax return. Relaisys has aggregated an outline of points for contractors to consider when they are checking their self-assessment tax return done by their bookkeeper, or in case they are setting up their own return to file online.
#1. Deadlines are important to remember!
Always remember that when it comes to tax return filing, deadlines play a crucial role. You should never forget the importance of deadlines. The deadlines for this year are:
- Paper filing of income tax returns: 31st October
- Online filing of income tax returns: 31st January
#2. Ensure you enlist for self-assessment
In case you are obliged to pay a self-assessment tax return for the 2020-21 tax year and haven't done so before then you will have to enroll for self-assessment. This tells HMRC that you are acquiring untaxed pay.
Through enlisting, you'll be sent a Unique Taxpayer Reference (UTR) number. You really should keep it safely as an UTR number is important to present your tax return, and it takes more than a month to get one so ensure you apply at the earliest opportunity.
#3. Are you making pension contributions?
Your pension contributions are produced using taxed money. While the taxpayer gives the net sum (for instance 80% in case you're a basic rate taxpayer), HMRC will contribute the tax paid on the contribution, straightforwardly into your pension scheme. Thus it implies the whole sum is contributed tax-free, so £80 from the contractor and £20 from HMRC. It helps you to easily reduce your tax bill.
#4. What is your tax code?
The tax code is only a series of numbers and letters that lets HMRC know how much tax you ought to be paying. The numbers in your tax code tell your employer or pension supplier how much tax free income you are qualified for in that tax year. In case you're not independently employed, you're taxed straightforwardly from your salary through a tax code. However, on the off chance that your tax code isn't right, you could wind up paying an excess of tax. Check your tax code and if you're worried that it isn't right, contact HMRC and let them know the issue.
#5. Get what you can/can't expense
At the point when your tax is determined, costs of doing business can be deducted from your general income so you are just paying tax on your benefits. You can just claim the costs that are ‘wholly, exclusively and necessarily’ made for your business.
#6. Never overlook your losses
You have to add your losses in the tax return. It helps you get less tax liability.
“Recording a loss in their tax return can reduce a contractor’s tax liability. Different types of losses have varying deadlines, so contractors should ensure they check past returns. For example if a contractor suffers capital losses, then these need to be reported to HMRC within four years of the end of the tax year in which the loss occurred.
In contrast, if a contractor makes a rental loss on a buy-to-let property then this should be reported in the tax return for the year in which the loss was made, and is subject to the normal 31 January deadlines.” says James Abbott , founder of Abbott Moore.
#7. Learn more about thresholds
The amount you owe on your self-assessment tax is determined with the help of tax thresholds. This amount will be calculated easily when you know your thresholds.
Income Tax
- 20% threshold on annual income more than £50,270
- 40% threshold on annual income more than £50,271
- 45% threshold on annual income more than £150,000
National Insurance
- 9% of profits and salary above £9,568
#8. Pronounce pay from PAYE work as well
A few contractors may likewise have PAYE occupations. While filing a self-assessment to guarantee you pay tax on your contracting pay, you will likewise have to announce the pay you have produced using a PAYE work (despite the fact that tax has been deducted all through the tax year).
You ought to ask your manager for a P60 or P11D, which will show the tax you have effectively paid through PAYE. You can likewise get this data from your HMRC online record.
How can Reliasys help?
Reliasys is an umbrella company that offers Full employment rights/Statutory Benefits, Perks, Insurance and more to all the contractors working with us. Reach out to our experts today to know more!
Call us at 020 3500 2615
Email us at: info@reliasys.co.uk