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HM REVENUE & CUSTOMS SELF EMPLOYED SELF ASSESSMENT TAX RETURN

When an individual starts a new business they are required to register the self employment with HMRC within 3 months of the business start up. Following registration HMRC will send out a tax return including a paper copy of the self employed tax return form. If the self employment is not registered within 3 months HMRC may issue a £100 fine.

Each self employed business is required to maintain accounts to determine the net taxable profit and report those accounts to the Inland Revenue. Formal financial accounting is not essential, neither is the services of an accountant unless the client requires bookkeeping or accounting services. What a self employed business should keep are financial records to support the amounts declared in the self assessment tax return.

Banking records are not essential records if a separate business bank account is not operated. The sole trader accounting package does not contain bank spreadsheets. If the business does operate a business bank account then accounting records of that bank account should be maintained to support the sales and expenses financial records. HMRC do not have a statutory right to examine personal bank accounts but do have a right to ask for and examine business bank accounts as they provide essential supporting financial records. The self employed accounts include both accounting spreadsheets for cash and bank accounts.

The self assessment tax return was changed for the financial year 2007-08 to a self employed tax return of which there are two versions, the full self employed tax return and the short self employed tax return. Business sales turnover determines whether the full or short tax form should be completed.

Full Self Employed Tax Return Form

Completion of the full tax return form threshold determining is aligned with the vat registration threshold

The full tax return form requires a full analysis of expenses deducted from sales to show the net taxable profit and capital tax allowances claimed. In addition the tax form includes a section to record the business assets and liabilities, completion of this balance sheet part of the tax return being optional. The DIY Accounting self employed accounts package completes the full return or the short tax return according to the required tax analysis.

Short Self Employed Tax Return Form

If sales income is under the full tax return completion threshold then the short tax return form should be completed. The self employed tax return short requires a shortened analysis of expenses plus the capital tax allowances which the DIY Accounting self employed accounts and the basic sole trader accounts package both complete automatically. If turnover is below £30,000 completion of the short tax return is even simpler requiring just total sales, expenses and the allowances claimed.

Submitting Paper Tax Return Form

Filing paper self assessment tax return is achieved by posting to HMRC to arrive by 31 October or hand into a HMRC enquiry centre. Tax office addresses can be found on the Inland Revenue website. After filing paper self assessment tax return the tax liability can be paid but remains due by the following January tax deadline.

Submitting Tax Return Form Online

Before the self assessment tax return can be filed online the self employed business has to register and activate the process which can take 7 to 10 days as the activation pin number is sent by post.

To begin the registration process visit the HMRC website home page and in the section marked do it online click self assessment. In the new user section of the HMRC online services page click register. On the next page click individual and the following page self assessment and then follow the online tax registration instructions.

During the registration you will be required to provide either your post code or national insurance number and also your unique taxpayer reference. The unique taxpayer reference would have been allocated when the business was first registered as self employed and appears at the top of the full tax return and also on any Inland Revenue letters regarding your tax affairs.

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Last modified: 03/17/09