Guide to self-employed tax returns

If you’re newly self-employed, then self assessment can seem daunting, particularly if you’ve chosen to do your tax return yourself. You’ll be responsible for submitting accurate information on your income, expenses and situation to HMRC for the tax year in question. The good news is, with a little preparation and knowledge, submitting your tax return can be a stress-free process.

What is a tax return?

A self-employed tax return is how you, a self-employed person, inform HMRC of your net income in a given financial year, which determines how much tax you need to pay. Unlike with contracted employees, who pay their tax through PAYE, self employed workers must submit their details, income, expenses and other financial information through a HMRC tax return to be told how much tax they owe.

You can submit your tax return either on paper through form SA100 or online at the HMRC website, and while HMRC don’t provide a self-employed tax return example to download, you can find form SA100 on their website.

Do I need to do a tax return?

HMRC guidance on this is clear, if you answer ‘yes’ to the following two questions and your work status meets the criteria, then you need to submit a self employed tax return (financial year 2021/2022 used as an example):

1. Did you work for yourself between 6 April 2021 and 5 April 2022?
2. Did you earn more than £1,000 from working for yourself?

You can use the HMRC website to check whether your work status means you need to submit a self employed tax return.

Do I need to do a tax return if I earn under £10,000

In most cases, yes. However, depending on your work status and how you earned the income, it’s possible that you may not have to. There are a number of contributing factors in establishing whether you need to submit a return, the best way to know for sure is to use the online HMRC tool linked above.

Late tax return penalties

If you miss the final deadline of January 31st for submitting and paying your tax return (or 31st July for your second payment on account) you’ll be charged a penalty, unless you’ve entered into an agreement with HMRC before the deadline:

• Penalty for late filing – The penalty for filing tax returns up to three months late is is £100, with a higher penalty if filed later.
• Penalty for late payment – If you don’t pay your tax bill on time you’ll receive a late payment penalty and be charged interest on any money owed. It’s always good to pay anything you can before the deadline to reduce the amount you’ll be charged interest on.
• Exceptions – If you’ve entered into an agreement with HMRC, you may be able to avoid late filing and payment penalties. Also, for the 2020/2021 self employed tax return, HMRC is waiving late filing penalties until Feb 28th 2022 and you won’t receive a late payment penalty if you pay in full by April 1st. You’ll still be charged interest on what you owe from Feb 1st.

Self employed tax return calculator

Unlike with PAYE, where you pay your tax through each pay packet so you’re always up to date, self-employed workers pay in two lump sums in January and July. This is why it’s useful to calculate how much you owe ahead of payment deadline day.

Using the HMRC ready reckoner tool is always the best way to calculate your tax bill. You can make a rough calculation of what you’ll owe on your self employed return by deducting your expenses from your income and subtracting your Personal Allowance (£12,570 in 2021/2022). Then work out 20% (£12,571 to £50,270), 40% (£50,271 to £150,000) or 45% (over £150,000) of that figure depending on your profit. But as mentioned, the ready reckoner tool is best for an accurate figure.

First year self-employed tax return tips

Your first self-employed tax return can be a worrying task to complete, but with preparation and patience it should be easy to do, here’s what to consider:

1. Put everything in a spreadsheet – Right from your first year of being self-employed, get into the habit of keeping your books in order and recording your income and outgoings in a spreadsheet as they happen. This way, when it comes to doing your tax return you’ll have most of what you need ready to enter, saving you time, hassle and stress.
2. Submit as soon as you can – While it may seem like you have plenty of time (April – Jan) to submit your tax return, it’s advisable to do it as soon as possible, so that you know how much you’ll need to pay. This way you can either pay it straight away or pay into your HMRC account each month to cover the cost and avoid a big bill at the deadline.
3. Prepare for a big bill – When it comes to making your initial January payment on your first tax return, you won’t just pay what you owe, you’ll also need to pay half again as a ‘payment on account’. This is a payment towards the following tax year’s bill to help you get ahead. You’ll also have no previous payments towards your bill, so be sure to set aside everything you owe in preparation.
4. Remember your expenses – As a self-employed worker, you may have to pay for utilities, equipment, fuel, a car, uniform and contractors, all of which are allowable business expenses. Be sure to record all of your allowable business expenses throughout the year and enter them on your tax return, as they reduce your profit and therefore the amount of income tax you need to pay.
5. Consider using an accountant – Just because it’s called self-assessment, it doesn’t mean you have to submit your tax return yourself. An accountant can submit it for you if you supply them with the necessary information. You can use our accountant cost guide to get an idea of fees, which are an allowable business expense and will reduce the amount of tax you owe.
6. Use the Powered Now app – You can use this to manage your invoicing and submit VAT returns directly to HMRC.

All Checkatrade members get free access to Powered Now’s invoicing app, 1 Trade App*.

The 1 Trade App allows you to manage your business on the go, create nice looking invoices and quotes, and lets customers pay you quickly.

Or, you can get 30% off if you upgrade to the full Powered Now app in your first year with Powered Now**. The upgrade to Powered Now adds team scheduling and tracking, the ability to accept card payments, and to submit VAT returns directly to HMRC.

There are many other benefits to becoming a Checktrade member, including savings on insurance, vans and discounts at wholesalers.

FAQs

What can I claim for on my self-employed tax return?

You can claim a number of costs as allowable expenses as a self-employed worker, including office costs, travel costs, staff costs, heating, lighting, business rates, advertising or marketing costs, and even training courses. HMRC provide a full list.

How do I fill in a self-employed tax return?

You have a few options. You can either download form SA100, complete it and post it back to HMRC, or you can register on the HMRC website and file an online tax return. Alternatively, you could hire an accountant to complete your self-employed tax return for you.

Should I use an accountant for my self-employed tax return?

This is entirely a personal preference. The benefits of using an accountant are you don’t have to spend the time submitting your tax return and you know it will be completed as professionally and tax-efficiently as possible. The flip side is you’ll pay for this service, but their fee is an allowable business expense.

Can I do my own taxes if self-employed?

Yes, and HMRC has made it as easy as possible for you to do your self-employed tax return yourself as part of making tax digital. Online is the most streamlined way to submit your return, with the process broken down into clear steps and questions. You can save your progress and return it later, and once submitted you have a simple breakdown of what you owe.

What is the self-employed tax return date?

There are three main self-assessment dates to highlight in your calendar:

• 31st October – This is the deadline for the paper submission of your tax return.
• 31st January – This is the online submission deadline and the final deadline for your self assessment return for a tax year. It’s also the deadline to pay the tax you owe and half of next year’s bill (first payment on account).
• 31st July – This is the date of the second payment on account, where you pay the second half of what you’re projected to owe next tax year.

*Offer is valid until midnight December 31st 2022. Offer is valid for non-current subscribers to Powered Now.

**The offer is valid for new subscribers to Powered Now only. The offer will be applied to the first consecutive subscription up to 12 months. All new subscribers will receive an initial 2 weeks free of charge trial period. The offer cannot be used in conjunction with any other offer.