Self Assessment Tax Return Guide

As a limited company director, there’s a lot of responsibility on your shoulders. One of the most taxing for many contractors is the annual Self Assessment Tax Return (SATR).

We understand that this process can be time-consuming, so we’re here to make your life as easy as possible. We created our guide to help you when tax return time comes around.

Do I need to complete a Self Assessment Tax Return?

A Self Assessment Tax Return must be completed by any individual who is paid outside of the PAYE scheme, or has received additional untaxed income on top of their PAYE. In most cases, full-time employees pay tax and National Insurance before they receive their monthly salary and will not be required to pay any additional tax. This means they would not be required to file an annual tax return.

You will generally be required to submit a tax return if any of the following applies:

• You are a director of a company
• If you have received income from land or property in the UK
• If you have received taxable foreign income in excess of £300 a year
• If you have received income from a trust or settlement
• If your annual income exceeds £100,000
• If you receive £10,000 or more from taxed savings and investments
• If you are higher rate taxpayer and receive £2,500 or more from untaxed savings and investments
• If your income is over £50,000 and you or your partner have received Child Benefit payments
• If you have Capital Gains Tax to pay

What information do I need to submit on a Self Assessment Tax Return?

The tax return can seem confusing, but there are only a few sections which you will be required to complete:

Income

You will need to state what your turnover is for the financial year. This is calculated by totalling up all sales plus all invoiced amounts.

Any additional income

You must declare all additional income to HMRC. Additional income can come in many forms, the most common are working part-time (whilst running your business), and if you are new to contracting, your earnings from your previous employment over the financial year. Your P60/P45 will detail the total figure of how much you earned in your previous employment.

Bank interest

Interest gained on all of your bank accounts must also be declared.

Property income

If part of your income is through renting out property, this should also be declared to HMRC. This will also include any business expenses relating to the property.

Business expenses

Expenses must be wholly and exclusively for business purposes, and will be included in your tax return. These business expenses must have occurred throughout the year and must be deemed as an allowable expense. For more information about what you can claim tax relief on, visit our expenses hub.

Tax details

Details of information which relates to any tax which has already been paid, through any means in the tax year.

When do I need to submit my tax return?

HMRC allows taxpayers to either submit their tax return electronically or in paper form. Electronic tax returns are required to be submitted by 31st January each year. For paper returns, the deadline is 31st October.

If you have never submitted a tax return before, you will be required to register on HMRC’s portal.

What happens if I miss the deadline?

If your tax return is submitted late, you will automatically incur a £100 deadline. An additional £10 penalty will be incurred for each subsequent day up to the value of £900.

If your tax return is more than 6 months late, the penalty will increase to 5% or £300 (whichever is the greater amount). Returns which are more than 12 months late will incur an additional £300 penalty.

Do I need to keep copies of my tax return?

Always keep copies of your tax returns, as this enables you to track things such as expense receipts and invoices. If there is ever a need for an HMRC investigation (which could look into information from up to six years previous), then having this information to hand will make the process a lot easier. Having digital back-ups of all returns, receipts and invoices is also advisable.

How can Nixon Williams help?

At Nixon Williams, we understand that life is hectic for contractors. That’s why we’re sharing our knowledge and expertise to help make your life as easy as possible.

For all you need to know about managing your finances as a contractor, visit our contractor tax hub.