Be ready for self-assessment accounting

Self-assessment describes how all individuals report their taxable income and expenses to HMRC, including income from a self-employed business, partnerships (apart from limited partnerships) and income from renting out property.

Self-assessment software is any software that records taxable transactions and/or analyses the transactions to calculate an individual's tax return. Some self-assessment software can also create the final tax return and even submit it electronically to HMRC.

Good self-assessment software helps you avoid underpaying tax or unnecessary fines. It also automates everyday financial tasks and enables collaborating with an accountant.

There are several self-assessment deadlines to be aware of:

• The date by which must have registered for self-assessment.
• The date by which you must submit your self-assessment forms.
• The date by which you must pay the tax you owe, along with any Class 2 National Insurance and any payments on account that might be owed.

Depending on the type of income and expenses you need to declare you may need to complete a number of different self assessment forms including the SA103 for your income from self-employment and SA105 for your income from any property.

Once you have completed all the necessary forms it is summarised onto the main self assessment form (SA100).

Some data such as income from the sale of your house must be submitted much earlier than other data (for example your share of any partnership profit or loss).

Each type of tax information has its own rules about when it must be submitted, if you are unsure then you should ask HMRC or an accountant

Additionally, there’s a separate deadline if you wish to fill in your self-assessment form manually and post it to HMRC.

Check these deadlines each year at HMRC’s website. If you miss any, you will be automatically fined.

Registration deadlines

If you haven’t already registered for self-assessment then you need to do so as soon as possible (you only need to register if it’s the first time you’re making a submission). The basic principle is you must notify HMRC that you are chargeable for income tax within six months from the end of the first tax year for which you are chargeable for tax.

Whatever the case, HMRC’s guidelines say you must register no later than the following:

• Self-employed/sole trader: 5 October in your second year.
• Partners in a partnership: 5 October in your second year.
• Not self-employed: 5 October following the tax year when you earned the money – for this purpose, a tax year is considered to run from 6 April to 5 April.

If you aren’t registered after these dates then you might be penalised.

The steps for registering for self-assessment are as follows:

1. Visit the registration website and input your email address when prompted. You will need to provide a valid email address, because you’ll be emailed a confirmation code that you’ll need to input when requested.
2. If you already have a government gateway User ID because of a previous interaction with the government’s online services, you’ll be invited to login with it. Once you’ve done so you can skip to Step 7 below.
3. If you haven’t got a government gateway User ID, you’ll need to create one. Start by following the prompts and entering your full name, including any middle names.
4. Create a password. Ensure you make a note of this because you’ll need it in future.
5. Input a recovery word. Like your password, this must be known only by you and you should make a note of it. It will help you access your account in future should you forget your username or password.
6. If you haven’t already got one from a previous interaction with the government’s online services, you’ll be shown your government gateway User ID, and it’ll also be emailed to you. It will take the form of a series of two-digit numbers, such as 29 31 32 48 90 31. You will need this in future when logging in because it effectively serves as your username.
7. You will now need to tell HMRC why you’re registering. For most sole traders registering for the first time, the first option will be required: “I want to tell HMRC that I am in business and need to register for a new tax or tell HMRC that the company is now active.”
8. Next, you’ll need to tell HMRC what kind of business you’re running. For sole traders, the second option is correct: “Self-employed/Sole trader/Sole proprietor”.
9. Next, you’ll see some notes about the trading allowance (see page 7) and will be asked to input the date when you started working for yourself.
10. Following this, you will need to enter details about yourself and your business, including your name, home address, and contact details. If you’re married and have a different surname to your birth name, ensure you answer yes to the question about changing your name.
11. You’ll also be prompted to enter the details about the business, including whether it’s included in certain specialised fields. Simply select ‘Yes’ or ‘No’ from the drop down menus alongside each question.
12. It’s OK for the business contact details, such as address and phone number, to be the same as those for your home.
13. Eventually, you’ll be asked for details about the business, including its trading name. If the business doesn’t have one, or you work for yourself under your own name, leave that question response empty.
14. After answering all the questions, you’ll see a Registration Summary screen. If ticks appear alongside each of the About You and About The Business sections, you can click the Next button to proceed.
15. Following this you’ll be prompted to declare, via a tick box, that the information you’ve supplied is correct.
16. Finally, you should see an acknowledgement screen, complete with a reference that you should make note of because you will use it in future when contacting HMRC about your application (although once the application is completed, you can discard the reference). Once you’ve completed the registration, it could take up to a week for HMRC to complete its security checks, which typically involves confirming your identity. You’ll then be sent an activation code by post. You will use it to set up your Unique Taxpayer Reference (UTR), which you will need to complete your self-assessment tax return.

HMRC expects you to file online and, within a few years, it’s likely to be the only way you can complete a self-assessment tax return. If you haven't completed a tax return online before, register for an HMRC online account.

When you have signed up, HMRC will post an activation code. According to gov.uk (https://www.gov.uk/pay-self-assessment-tax-bill/bank-details), this can take ten working days to arrive – or up to 21 days if you are abroad. You will also receive a user ID and Unique Taxpayer Reference (UTR). It's also typically found on your HMRC online account or paying-in-slip.

Now, you can pay a self-assessment tax turn by making a bank transfer from your bank account to HMRC. Faster Payments, Chaps and Bacs is supported. You’ll need to include your 11-character payment reference before paying.

Our guide to filing a self-assessment return covers the process in more detail: https://www.sage.com/en-gb/blog/file-a-tax-return-online/