Preparing for Your Self-Employment Tax Return? Here's Your Comprehensive Guide

Are you getting ready to complete the self-employment section of your self-assessment tax return? Not sure where to find the necessary figures or which allowances to claim for reducing your tax? This guide is here to help! You'll get a step-by-step walkthrough of the self-employment section, plus insights into capital allowances, CIS, National Insurance, and the short-form tax return (SA200) – a true time-saver!

Friendly Disclaimer: While I am an accountant, I'm not your accountant. The information provided is legally accurate but intended for guidance only. Every individual's situation is unique, so use your best judgment and consult a qualified professional if you have any doubts or questions. Mistakes can lead to penalties.

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Table of Contents:

1. Who Should Fill in a Self-Employed Tax Return?

2. Where is the Self-Employment Section?

3. Who Can Complete the Short Form Tax Return (SA200)?

4. How to Complete the Self-Employment Section of Your Tax Return

5. How to Choose Your Accounting Date

6. What is the Cash Basis?

7. Declaring Self-Employment Income

8. Claiming Self-Employment Expenses

9. Claiming Capital Allowances

10. Making Tax Adjustments

11. Using Tax Losses

12. Entering CIS Tax Deductions

13. How to Claim a Class 4 National Insurance Exemption

14. Paying Class 2 National Insurance Contributions

 

1. Who Should Fill in a Self-Employed Tax Return?

If you work for yourself and receive income that isn't taxed at source, you'll need to complete the self-employed section of your tax return. If your business turnover is less than £1,000, you might not need to fill out this section thanks to the trading income allowance, which could simplify your tax reporting.

 

2. Where is the Self-Employment Section?

You should have notified HMRC about your business in the 'tailor your return' section of your SA100 return when you logged into your .GOV account with your HMRC user ID. Once notified, the self-employment section will appear as part of your self-assessment.

 

3. Who Can Complete the Short Form Tax Return (SA200)?

HMRC provides the short-form tax return (SA200) for individuals with simple tax affairs, particularly those with business turnover under £85,000 for the tax year. If your turnover is under this threshold, you can use the simplified form, entering only your total self-employed expenses. If over, you'll need to provide a detailed breakdown.

 

4. How to Complete the Self-Employment Section of Your Tax Return

Answer the questions to help HMRC understand your business and claims. Here’s how:

• Foster Carer/Adult Placement Carer: Tick if applicable.

• Adjustment to Profits Chargeable to Class 4 NICs: This applies if you need to adjust your Class 4 National Insurance due to special circumstances.

• Averaging Adjustment: Claim this if you need to spread out lump sums of income, such as advances.

• Practising Barrister: Only tick if this applies to you.

• Changed Accounting Date: This can affect your tax bill due to overlap profits; choose carefully.

• Declared Results on Previous Return: Select if this applies.

• Basis Period: Ensure your accounting period aligns with your tax year to avoid overlap profits.

• Contracts Spanning Accounting Dates: Follow special rules for contracts that span across your accounting period.

• Business Abroad: Declare if your business is based outside the UK.

• Overlap Relief: Claim if applicable, especially if you’ve had a change in accounting date.

• Voluntary Class 2 NICs: Opt to pay this to protect state benefits.

• Claiming CIS Deductions: Add up deductions from contractors if you’re a CIS subcontractor.

• Tax Deducted Under CIS: Record if you need to claim back tax deducted.

• Disguised Remuneration Income: Disclose any income earned through tax avoidance schemes.

 

5. How to Choose Your Accounting Date

Your accounting date typically spans 12 months. For ease, align it with the tax year (ending on 5 April) to avoid overlap profits and simplify your tax reporting.

 

6. What is the Cash Basis?

The cash basis allows you to record income and expenses based on actual receipts and payments. It can simplify tax reporting, but may not be suitable for all. If used last year, you can continue or switch if necessary.

 

7. Declaring Self-Employment Income

Include all sources of business income, such as invoices, cash takings, and payments from payment processors. Ensure to exclude non-business income and correctly declare SEISS grants separately.

 

8. Claiming Self-Employment Expenses

If not claiming the Trading Income Allowance, either enter a total or a detailed breakdown of your expenses, depending on your turnover.

 

9. Claiming Capital Allowances

Claim tax relief on equipment or vehicles bought for your business. Note that if using the cash basis, capital allowances may not apply unless specific conditions are met.

 

10. Making Tax Adjustments

Adjust for personal use of business goods or services and include any business income not previously declared. You can also set off earlier tax losses against current profits.

 

11. Using Tax Losses

If your business made a loss, you can carry it back, set it off against capital gains, or carry it forward. Be aware that certain options may not apply if using the cash basis.

 

12. Entering CIS Tax Deductions

For CIS subcontractors, include the total deductions made from your payments by contractors. Ensure you report gross receipts separately.

 

13. How to Claim a Class 4 National Insurance Exemption

Certain individuals, such as those over State Pension age or those not resident in the UK, may be exempt from Class 4 NICs. Check the specific criteria to claim this exemption.

 

14. Paying Class 2 National Insurance Contributions

If your profits are near the annual threshold, you must pay Class 2 NICs. You can also pay voluntarily to maintain eligibility for state benefits.

 

Related Topics:

• How to Fill In Your Tax Return Online

• What Happens if You Miss the Self-Assessment Deadline?

• How to Repay Your Student Loan When Self-Employed

• Where to Show Your SEISS Grant On Your Tax Return
  
   

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