Self-employment may be an exciting, challenging, and concerning move for all individuals. Stress increases while determining and paying your tax due in the first year. You must file a tax return yearly if you own a small business or are a sole trader. Many individuals wonder if it would be better to employ a chartered management accountant instead of doing it yourself.
Many businesses choose an accountant to help with their self-assessment, as they make sure you don’t commit errors. They stay updated with tax legislation, so you don’t have to, as it constantly changes. That implies no need to be concerned about fines for late returns or inaccurate information.
One of the hidden advantages is that you can obtain expert assistance from your accountant. An accountant can assist you with organising your paperwork to make the taxation process smoother next year and provide recommendations on managing your money.
Do self-assessment tax returns vary?
If you have many sources of income, your self-assessment tax returns will be more complicated. This is due to the fact that you will be required to record all sources of income, including work, self-employment, rental income, and investments.
If you have deductions to claim, your self-assessment tax return will be more complex. You need to track all your expenses and calculate the deductions you may be liable for.
It is important to keep good records of your income and expenses. This will make it easier to complete your self-assessment tax return and avoid making mistakes.
How do self-assessment tax returns work for Making Tax Digital?
Making Tax Digital (MTD) is a new way of reporting income and expenses for self-assessment taxpayers in the UK. Under MTD, you must use compatible software to keep digital records of your income and expenses and submit quarterly updates to HMRC. You must also submit a final declaration at the end of the tax year.
MTD will help to ensure that your tax returns are more accurate, as you will be required to keep digital records of your income and expenses.
Completing a tax return for sole traders
You must file a “Self-assessment tax return” if you are self-employed either as a sole trader or as a director in the business, or if your combined earnings for the year are more than £100,000 then you will meet self-assessment criteria and be required to complete a tax return each year. It might be challenging to complete a tax return yourself, but it’s important to do it accurately to avoid fines.
A few tax breaks are available to sole traders, including business expenses, travel costs, and professional fees. To lower your tax liability, claim all the eligible deductions. You can get assistance from HMRC or hire a licenced accountant if you have trouble finishing your self-assessment tax return.
Record keeping: Bookkeeping effectively logs all daily transactions for your company, including bank statements and receipts. It’s a good idea to save these if HMRC opens an inquiry into your account. You will have all of the relevant information and the necessary pertinent proof in this manner.
Expenses: Expenses can be subtracted from income to lower the amount of taxes due. You must keep accurate records of your costs to deduct them for tax purposes. You should maintain relevant receipts, invoices, and other paperwork to support your claims.
Registering for a self-assessment tax returns
When you register for self-assessment, you will be assigned a 10-digit code that uniquely identifies you. A Unique Taxpayer Reference (UTR) number is what this is. You’ll need to utilise this while filling out your own tax return, so keep it handy for the next stages.
Completing a tax return for partnerships
Partnerships are liable to pay income tax on their profits, just like individuals. The partnership’s income tax liability is calculated on the partnership statement, which is a document that summarises details of the partnership’s income and expenses for the tax year.
Partnerships can deduct a variety of expenditures, including business expenses, travel expenses, and professional fees.
Record keeping: Maintaining accurate records of your partnership’s earnings and outlays is crucial. This will make it simpler for you to complete your tax return and reduce the likelihood of errors. You should maintain relevant receipts, invoices, and other paperwork to back up your claims.
Expenses: Partnerships can deduct various expenses when filing tax returns, including professional fees, travel, and business expenses. To lower your tax liability, make sure to claim all of the deductions allowed.
Preparing a partnership statement: Partnerships must prepare a partnership statement for the tax year that summarises their revenue and spending. The income tax liability of the partnership will be calculated using this statement.
Individual tax returns: A partnership requires each member to submit an individual own tax return. Each partner’s portion of the partnership’s revenue and costs will be calculated using the partnership statement.
Completing a tax return for landlords
Completing a tax return for landlords can be a complex process, but it is essential to do so correctly in order to avoid penalties.
Record keeping: To calculate the profit, you’ll have to utilise all your costs and rent received from renters. While you are not required to provide the data as part of your tax return, HMRC may want to examine them if an inquiry is launched.
Property expenses: Landlords can deduct expenses like repairs and upkeep, mortgage interest, and property taxes. To decrease your tax burden, make sure you claim all of the eligible deductions.
Reporting your rental income: Rental revenue must be reported by landlords on their self-assessment tax returns. Rental income must be reported in the year it is received.
Capital Gains Tax
If you sell a property you have rented out, you may be liable to pay Capital Gains Tax. The amount of Capital Gains Tax you will pay will depend on the profit you make on selling the property.
How can Cloudco Accountants help you?
Accountants can assist you in identifying all of the company costs that you are eligible to deduct. Rent, utilities, office supplies, and travel expenses are all included. Accountants can assist you in determining if your professional fees are deductible and gather the evidence required for a professional accountant to support your claims.
Working with an accountant is an excellent option to maximise your tax return. Accountants can assist you in identifying all of your possible deductions and preparing your tax return correctly and on schedule. Accountants can also help make you save money on taxes while also maximising your return.
If you are somewhat tax-savvy with simple affairs, you should be comfortable doing your self-assessment tax return.
However, people who need clarification about taxes, have more complicated affairs or need to file their own tax return or a company tax return may consider hiring an accountant to help with tax preparation. Contact Cloudco Group today!