Have you filed for your self-assessment yet? Well, time is ticking and certainly of the essence. No matter what point we are in the tax year, it’s also never too early to start planning your taxes. If you’re worried about making a mistake on your tax return or you simply don’t know where to start, look no further. Here, we cover everything you need to know about tax as a self-employed locum.
What is an Income Tax Self Assessment?
Income Tax Self Assessment is the system HM Revenue and Customs (HMRC) uses
to collect income tax from individuals. The process is referred to as Self Assessment
as each individual is responsible for the completion and filing of their own return. The
return covers a 12 month period from 06 April to 05 April the following year. The
2019/20 tax year ran from 06 April 2019 to 05 April 2020.
How do I know if I need to file an Income Tax Self-Assessment?
It is the individual’s responsibility to identify if they need to file a return. You must file Income Tax Self Assessment returns if you:
- Work in a Self-Employed capacity
- Are a Company Director;
- A Partner in a business partnership;
- In receipt of more than one source of income.
When do I need to file my return by?
If you haven’t filed your 2019/20 return on paper by 31 October 2020, you need to file online by 31 January 2021. You can file before these dates and it is advisable to do so.
Can I deduct expenses when calculating my taxable income?
You can deduct any expenses that you have incurred unless they have been already reimbursed by an employer. The expenses must have been incurred “wholly, exclusively and necessarily” in the course of a business. The actual expenses allowable are dependent on the work you do and how you do it and may vary from person to person.
What happens if I file my return or pay my tax after the deadlines?
If you file your tax return after the deadline you will be charged a penalty. The initial penalty for filing the 2019/20 return late will be £100 and will increase after 3 months. Late payment incurs a daily interest charge. HMRC are, however, currently offering support to taxpayers who are unable to pay their tax on time due to the impact of Covid19.
I have been asked to make a Payment on Account for my Self Assessment Income Tax. What is this?
A payment on account is an amount of tax you will be asked to pay in advance of your
next income tax calculation. For example You may be asked to make a payment on account for 2020/21 if you have more than £1,000 tax liability for 2019/20. The payments are due on:
- 31 January 2021 and
- 31 July 2021.
These amounts will then be deducted from your next income tax due when it is
What records do I need to keep?
You need to retain details of all income received and any work-related expenses
incurred in the tax year. For example:
- Business Income received;
- Business Expenses;
- P60 received from any employment in the tax year;
- P11D received from any employment in the tax year;
- Bank Interest Statements;
- Building Society Interest Statements;
- P60 for any pension received;
- Details of any pension contributions made.
This is not an exhaustive list and an accountant can advise on any information to be
included on your return.
How long do I need to keep any records?
HMRC requires you to keep your records for at least 6 years from the end of the relevant tax year. In certain circumstances, you may need to keep records longer.