Today I'm going to walk you through the one thing I get asked about more than anything as an accountant:
"How do I fill in my tax return?"
Filling in your tax return is definitely something that gets easier with experience. Tax, in general, can seem like a complicated minefield just waiting to trip you up (or send you an unexpectedly large bill).
But once you've got the hang of it, it's not too bad!
So, let's start.
Please keep in mind that because everyone's situation is different, so I'm not able to give specific advice for every single scenario that could arise. However, we do offer individual advice for a small fee. Please email firstname.lastname@example.org if this is something you're interested in.
Also, I'm sure you're aware, but just in case: the tax year runs from 6th - 5th April.
You will need:
- Your Unique Tax Reference ("UTR") (make sure you've registered as self-employed)
- Your HMRC login details
- Your National Insurance Number
- Your profit and loss/income and expenses accounts
- Bank statements, expenses records and receipts
- Details of any income from sources other than your main business
- Forms P60, P11D, P45 or P2 if relevant
- Your tax return from last year, unless this is your first one
If you're more of a visual learner, I've created a video walkthrough/tutorial which you can see below.
Log in to the Government Gateway.
If you need to complete a tax return, you should see "2016 to 2017 tax return due by 31 January 2017" at the top, with the number of days you have left to complete your return next to it, and "Complete Return" in a grey box underneath.
Go ahead and click the "Complete Return" box.
The welcome page
This page will give you some information about the criteria you need to meet to complete your tax return.
If you're self-employed, you should meet all the criteria shown and be able to click "Start" to begin completing your tax return.
Tell us about you
Pretty self-explanatory. Simply fill in your personal details - some sections, such as your UTR, may already be completed for you.
You must fill in all sections marked with a red asterisk, and dates must be entered in a DD/MM/YYYY format: for example, 23rd November 2017 would be 23/11/2017.
Tailor your return
These questions are important, as they will determine which sections you will need to complete on your return, so make sure you're 100% confident that you have answered them correctly.
For question one, "do you need to complete the employment section?" answer "yes" if during the tax period:
- you were employed in any way (for example full time, part time or casual employment or agency work)
- you were a resident in the UK and received an income from employment abroad
- you received income as a company director or held office as a chairperson, secretary or treasurer
If you answer "yes", you'll be prompted to provide further details about each position of employment you held.
For question two, "were you self-employed?" as this guide is for self-employed people, select yes and you will again be prompted to provide some more detail about your business.
The answers to these questions may differ and ultimately only you will know the correct answer to them as you run your business, so unfortunately I can't tell you which answers to put here. However, they are pretty straightforward so you should know which answer to select. If you're unsure, click the green question mark next to the answer box for more information.
Select "Next" to save your answers and go to the next section.
Clicking "Next" will automatically save your return, so you can come back to it at a later date, if you need to check some information for example. You can also click "Save" at any time.
More questions, and more on the next page again! Again, only you will know the answers, I can't tell you without knowing the details of your business or income.
Fill in your return
From here, you'll be presented with a summary page, which will show what you've completed so far - "Tell us about you" and "Tailor your return" pages 1-3 - which will have green ticks next to them to signal that they are complete.
Underneath these sections are the parts of the tax return you will need to complete based on the answers you have given up to now. These will have blue arrows next to them to signal that they still need to be completed before you can submit your return.
You can click the names of the different parts to access them, which means that you can complete them in a different order than they are set out, or amend any previously completed sections if you realise that you've made a mistake.
This will most likely be the first section of your tax return that you're expected to complete.
You will be asked if you had an annual turnover of £83,000 (the current VAT threshold) or more during the tax year you're completing the return for.
If your annual turnover was less than £83,000, you will only need to complete a short tax return.
There will be a series of statements after this. Read through them carefully, and click the box for any that apply to you.
If none of them apply to you, simply select "None of these apply" at the bottom of the page.
The next page will ask for your business name, description and postcode, and whether any of this information has changed in the last 12 months.
This information will have been submitted to HMRC previously, when you registered as self-employed, so these fields may already be completed for you, but you can change them if they are no longer correct.
When it comes to the description of your business, keep it concise and don't over-complicate it.
If you started or ended your business during the tax year, enter the date as requested.
The date your books are made up to will usually be 5th April of the tax year you're completing the return for, or 31st March of the same year.
The next questions asks whether you account for your business on a cash basis. This means that you record business income when you've received it and payments when you make them, so when it actually comes in and out of the business.
Traditional, or accrual, accounting records income when you send an invoice and expenses when you receive a bill.
Numbers time. Now we're going to start filling in the details of our income and expenses, so make sure you have your accounts ready
First, enter your business turnover - any money earned by your business.
Below this, any other business income not included in your above turnover figure, so any income which you have received but which was not a result of your usual business activities. For example, if you have let out part of your business accommodation and received rent for it.
These should automatically be added together on the page to show your total business income.
Next, you'll be asked if you would like to record your expenses as a single total value or a detailed breakdown, and you'll enter your total allowable expenses in the box below.
HMRC state that if your annual turnover is below £83,000, you can record your expenses as a single total value, however, you can choose to enter a detailed breakdown if you want to.
If your annual turnover is £83,000 or over, you'll have to enter a detailed breakdown of your expenses.
Your total expenses will be subtracted from your total business income automatically to calculate your net profit or loss for the year.
Check that the figures match your accounts, and click "Next".
Detailed allowable business expenses
If you're providing a detailed breakdown of your expenses, the next page you see will show a list of allowable business expenses, with boxes next to them for you to complete.
If you need some more information about the different categories of expenses, you can click on the green question mark next to the answer box, but hopefully you will already have separated your expenses into the relevant categories.
If you'd like me to write a blog post explaining the different categories and what kind of expenses can go into them, please let me know!
The page will automatically calculate the total allowable expenses and profits - make sure this matches your records and the details on the previous page.
Capital allowance and balancing charges
The next section will ask about capital allowances. You can deduct the value of certain items purchased for your business from your profits before tax, which will reduce the amount of tax you have to pay.
Capital allowances can be claimed on items that you use in your business, but keep in mind that you must own the item, not rent it. Most capital allowance claims will fall under the Annual Investment Allowance ("AIA"), though some items, such as cars, do not qualify for AIA and must be claimed for as a writing down allowance instead.
You'll also see a section for balancing charges, which occur when you sell an item you have claimed capital allowances on. They're quite difficult to explain, but HMRC has a great example of how to use them here.
If you use cash basis accounting, you cannot claim capital allowances (except for cars).
Other tax adjustments
Goods or services for your own use is when you or your friends/family take any stock or goods out of the business. It's unlikely, but if this applies to you, make sure you include the value of the goods rather than the cost to you. If you've already included this in your turnover figure from earlier, you can leave this section blank.
If your business has made a loss in previous years, you can bring it forward and offset it against your profits to reduce the amount of tax you owe. If this applies to you, make sure to check last year's tax return for the correct figure.
Any other business income not already included will usually be irrelevant, but if there is anything, enter the amount here.
Again, the page will automatically calculate your profit or loss based on the figures you enter.
If you've made a loss during this tax year, you can either claim it against your other income (income you have received which was not part of your business activities), carry it back to previous tax years to offset the income received them, or carry it forward.
This will only apply to you if you pay a subcontractor covered by the Construction Industry Scheme.
Class 4 National Insurance Contributions ("NICs")
Here, you will be asked if you're exempt from paying Class 4 NICs.
Handily, HMRC provide you with a list of people who are exempt on this page, so if any of those apply, you'll know to select "Yes". If not , select "No" and click "Next".
Any other information
If you have any other relevant information about your business, enter it in the text box provided.
Now you will be shown a summary of the information you have entered so far: income, expenses, profit, capital allowances and adjustments.
Class 2 NICs
If your profits are £6,025 or above, you will owe National Insurance. This will automatically be calculated for you.
If your profit was less than £6,025, you may want to voluntarily pay NICs, as not paying it can affect your state pension rights (you can read more about this here).
This takes us to the end of the self-employment part of your tax return. If you have any other details to fill in based on the answers you gave in the "Tailor Your Return" section you will be prompted to complete these now, if you haven't already.
This is not likely to be relevant, but if you have underpaid tax during this tax year or the previous one, enter the details here.
You may need to check your tax code for more details or check with your employer if you are also employed.
If HMRC believe that you have underpaid tax, they may automatically calculate the amount, which you can amend by selecting "No" from the drop-down menu on the page and providing the correct amount.
This will usually be irrelevant too, but could include arrears of Class 2 NICs or a tax credit overpayment.
Presumably, if you've overpaid tax, you will want to select "Yourself" from the drop-down menu here!
Click "Next" and you will be asked to enter your bank details to receive a repayment of any overpaid tax. If you paid by credit or debit card, HMRC will automatically try and make the repayment to the same card.
If you have not paid enough tax
Here, you are given the option for HMRC to collect the tax you owe for this tax year, next tax year, if it is under £3,000. Read this page carefully before making a decision, and note that this can only be done if you submit your tax return before 31st December.
Most accountants will advise you to select "No" to both of thee options, as these adjustments can cause complications. However, you may want to do some research or consult someone before making a decision.
Adjustments to tax due
Enter the amounts of any increases or decreases in tax due to adjustments here.
This section is likely to be irrelevant to you.
Any other information
If your tax return includes any estimated or provisional figures, select "Yes" and you will be prompted to provide more detail on the next page.
An estimated figure may be provided where it is not possible to provide an accurate figure, for example if the records have been lost.
A provisional figure is one which has been supplied pending the submission of the accurate figure.
If you selected "No" to the above, the next page will show you a text box in which you can input any other relevant information, and the option to add an attachment to your tax return.
You may want to attach a copy of your accounts, or any information to support your tax return, but you won't usually have to.
Check your return
Clicking "Next" should take you back to the summary page you saw before completing your information, which shows which sections you have completed.
These should now all have a nice green tick next to them!
View your calculation
This page will show you how much you owe and when you need to pay it - eep!
Save your return
Make sure to save a copy of your tax return for your records. If you want to print it, you can do that now, too.
Submit your return
Before submitting your return, you must read the statement on this page and tick the box to agree to it.
Then you can hit that submit button.
Once you have submitted your tax return, you should see a confirmation of your submission on the screen, which you may want to screenshot and save, and you should receive an email as well, which you should also keep safe.
And...breathe! I think this might be the longest post I've ever written! Thank you for reading. I hope you found this guide useful and that it's helped you to complete your tax return.
Let me know what you think, and if there's anything I haven't included that you need more information on, please leave a comment and I'll add it in.
I'm a financial coach and mentor helping female business owners to gain the knowledge and confidence they need to manage their finances successfully and have a positive relationship with money. If you're ready to take control of your finances, click below to find out how I can help you.
I also have a range of amazing resources which you can use to help improve your business finances.