How to File Your First Tax Return
Get organised now so filing your end-of-year tax return can be a stress-free experience.
Never filed a tax return before? Don’t panic. Millions of small business owners file a self-assessment tax return every year. You need to do one if you’re a company director, partner in a business or self-employed.
This guide will help you get sorted and know what to expect now so you don’t need to panic when the 31 January deadline looms.
Register with HMRC
To submit your tax return online, you’ll need to register with HMRC. You’ll get an activation PIN in the post. It can take a week or so for this to arrive so make sure you leave plenty of time.
Organise Your Expenses
It’s not the most exciting job but it’s worth doing. Keep all your invoices and receipts filed together. Just put aside a little time each month to make sure everything is in one place. And don’t forget to keep tabs on your travel and entertaining expenses (the rules around these look set to change in the future, so make sure you know the latest information for what is and isn’t allowed).
Get Acquainted with Your Unique Tax Reference Number
Apart from your PIN, you’ll also need to quote your Unique Tax Reference (UTR) on your tax return. This is made up of ten numbers, eg, 1234567890, and you’ll find it on paperwork from HMRC. Remember, it’s different to your National Insurance number.
Keep track of everything else you need:
- Do you have your P60? If you’re paid wages, ie, if you’re employed or a director of your own limited company, you should have one of these showing your salary and tax.
- Have you recently switched from being an employee to starting out on your own? Or have you earned money elsewhere (such as profits as a sole trader, or income from a trust)? You’ll need to keep tabs on everything you earn, no matter where from.
- And don’t forget about any interest you may’ve earned on savings in the bank. Just remember, the interest earned on a cash ISA isn’t taxed.
How to Calculate Taxes When You Work from Home
If you work from home, you may be able to claim part of your costs for things like:
- Council tax
- Mortgage interest or rent
- Internet and phone usage
You’ll need to figure out a way to divide up your costs, eg, depending on the amount of time you’re spending working from home or the number of rooms you use for business. Take a look at gov.uk for guidance on how to do this. Bear in mind that different rules apply depending on whether you have a limited company, are self-employed or are a partner in a business.
What Else You Can Claim
You can also claim for other items, such as:
- Business-specific insurance
- Accountancy fees
- Other professional services
- Office equipment, like computers and printers
Again, different rules apply depending on how your business is set up, eg, as a limited company, self-employed or a partner, and what type of accounting system you use. Make sure you seek advice from an accountant if you need to.
For detailed information on what you can claim for, take a look at gov.uk.
If you miss the 31 January deadline, HMRC could fine you £100 for failing to file on time. And, you’ll be charged interest for paying any tax you owe late. If you have a genuine reason for paying late, like a disaster, illness or theft, call HMRC and talk to them about it.
Final Tax Return Takeaways
- You’ll need to pay corporation tax on your business’ taxable profits. HMRC needs full accounts for corporation tax.
- You must prepare annual accounts to file with Companies House. When these are due depends on when you set up your limited company.
- Shareholders need to pay income tax on dividends.
Sole Traders or Partnership
- You don’t need to prepare accounts for tax purposes. But it may be difficult to keep on top of your expenses and profits without keeping accounts.
- If you trade through a limited liability partnership, you must prepare accounts for filing with Companies House.
- You don’t need to submit accounts to HMRC unless you’re subject to an investigation.
Make sure you keep tabs on what you need to do tax-wise and find yourself a good accountant or bookkeeper. Take a look at gov.uk or speak to HMRC if you’re not sure what you have to do.
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