Meet Annabelle. She’s a mobile beautician and reflexologist!
Annabelle had set up her Business a year before the dreaded pandemic hit and didn’t have enough accounting history to claim the support from self employed grants offered by the Government.
Annabelle didn’t earn much at all in the year 2020/21 – barely scraping the £1,000 threshold required to complete a self assessment form.
As if this wasn’t hard enough, shockingly for Annabelle, her Accountant’s fees were almost half her earnings!!!
“Don’t get too stressed, Annabelle” said Rachel.
If you need to complete your self assessment by yourself there’s a few key bits you need to know.
• First you will need a government gateway login.
• Apply for this and wait for the code & password to arrive.
• A list of your incomings and outgoings.
• A P60 if you are also employed.
The Government Gateway login can take a while to receive, so don’t leave it until the last minute.
The Deadline is 5th October for registration… but why not just get onto it today…
Go on, it’s one less thing to think about!
Assuming you’re set up for online, you have until 31st January to submit your return and pay your tax.
The website is extremely busy on the run up to the 31st January, and it has been known to crash.
Why stress yourself out with that potential headache when you could start compiling your income and expenses now?
The added bonus to at least making a start on your tax return now is that you will know exactly how much you tax bill is now and not on the day that you need to pay it.
As a Sole Trader you need to keep your records for 5 years!
So try not to keep your receipts screwed up in a bag – they’ll take up too much space, you’ll inevitably lose some… possibly even losing a few bags full!
It is also a pain in the bum when compiling your costs if all your receipts are in a muddle.
OK OK, it’s not a pain in the bum…
It’s a NIGHTMARE!!!
Quick Tip: If you are not using software such as Xero or Quickbooks, here’s some things that will make your life easier. If you could do just;
ONE THING get an envelope for each month and start putting your receipts in each envelope.
TWO THINGS before you put your receipt in your envelope write a category on the top.
THREE THINGS get those envelopes out once a quarter and enter them on my handy Self Assessment Entry Template.
Do all three and you’re literally making your life a thousand times easier!!
There’s a few categories to look at: –
• Office, property and equipment
• Car, van and travel expenses
• Clothing expenses
• Staff expenses
• Reselling goods
• Legal and financial costs
• Marketing, entertainment and subscriptions
Giving away samples
• Training courses – i.e. refresher NOT learning to play the ukulele
Bung it in a spreadsheet
I’m talking to the people that don’t use receipt logging apps!!
And by the way, they are cool and would save you time!
The easiest way to compile the costs is in a spreadsheet – luckily for you I have created a template that will easily tell you what numbers to put in the boxes on your self assessment.
Compile this information for the tax year 6th April – 5th April each year. Keep this record saved AND backed up.
Time to enter the Gateway
HMRC, good or bad experience, their self assessment system is actually pretty good now.
You’ll need your Government Gateway login which is usually 16 digits long and your password.
You have two types of self assessment, one is where you have another income (but not a business), such as a rental property, the other one is self employment.
The website is fairly intuitive and will ask you the question “did you earn more than £1,000 from self employment”. When you tick yes, it asks you to fill in your company details and take it from there.
Use my handy spreadsheet to pop the numbers in the boxes and hurrah, boom! whammy bash!
Congrats!!! You have a completed tax return!
Payment for your taxes is due on 31st January each year at the very latest.
HMRC give you several different options for paying.
- If you are employed and this is your side hustle, you can request your tax code to be updated.
This is my least favourite option as you are handing control of tax deductions over to HMRC and you may end up with a significant effect to your tax code for which you are unprepared.
- Payment on Account.
Again I am not a massive fan of this method. If your tax is estimated to be over £1,000 then you have no option BUT this option. You’ll be paying estimated tax for your current tax year.
- Payment by DD around 31st January
This is the option I use with my own self assessment when the tax is estimated to be under £1,000.
Preparation for next year
Now that I have convinced you to record your income and payments regularly, you should be able to see how much profit (or loss) you are making at any point in time.
Plus, you’ll also be able to also see how much tax you expect to be charged at any given point.
“I’m still a bit worried Rachel, please help!” says Annabelle
Call me or drop me a line for a no obligation chat and we will see how I can help you. Even if it’s just registering you for the Gateway to take a bit of pressure off.