There is no legal obligation for a taxpayer to employ the services of an accountant to fill in a self assessment form. However Sunny Accountants' clients understand and appreciate the benefits of working with a tax professional to get it done and out the way and we'll explain why here.
In this article, we explain:
- what self assessment is
- what a self assessment form looks like
- completing a self assessment form yourself
- the “opportunity cost” of doing it yourself
- how to work with an accountant on your self assessment
What is self assessment?
The self assessment is an official Government tax return form which obliges you to accurately report on:
- your earnings,
- the sources of those earnings, and
- any allowable expenses incurred which may be used to reduce the amount of tax you pay.
Unlike the system which went before self assessment, the responsibility is now on taxpayers:
- to correctly work out how much tax they owe,
- to report that to HMRC within a set timescale after the end of the year, and
- to make payment of any tax owed in full (subject to the payment on account system).
What does the form look like?
There are two versions of the self assessment form – an online form and a paper-based form. Whichever version of the form you choose to complete, you have to share exactly the same information with HMRC.
The self assessment form must be used by you to report details of your income from all applicable sources – for example, employment (PAYE), dividends, invoices issued in a self-employed, and so on. For sole traders and partners, self assessment (via form SA800) also records details of the allowable expenses you have incurred in the course of your business – when correctly claimed, expenses reduce the amount you pay in tax.
But the self assessment form might be only one of a number of forms you have to fill in. There are also the following additional forms you have to submit based upon your personal circumstances:
- SA108 - Capital Gains Summary
- SA102 - Employment
- SA106 - Foreign
- SA103L - Lloyd's underwriters
- SA104F - Partnership (Full)
- SA104S - Partnership (Short)
- SA109 - Residence, remittance basis
- SA103F - Self-employment (Full)
- SA103S - Self-employment (Short)
- SA110 - Tax Calculation Summary
- SA107 - Trusts
- SA105 - UK Property
When do I have to submit the form and what happens if I am late?
If you complete the paper self assessment form, you have until the 31st October following the end of the tax year (the tax year ends on the 5th April).
For users of the electronic form, you have until 31st January following the end of the tax year. This means that, for the tax year ending April 5th 2020, your electronic submission must be in by 31st January 2021.
If you are late, there are two series of fines to which you will be subject – fines for failing to submit the form on time and for failing to pay on time. If you pay on time but you do not submit your form on time, only the fines for non-submission will apply (and vice versa).
Battle of the form fillers – taxpayer versus accountant
Whether you intend to complete the form by yourself or you intend to use an accountant, we would strongly recommend that you regularly use online bookkeeping software to keep your financial records up to date.
Not only do you benefit from an ongoing and constantly updated record of your business's transactions (and its accruing tax liabilities) but it makes it easier and quicker for you (or your accountant) to claim allowable expenses for either yourself or your business (if your business is a limited company, it pays corporation tax which it self-reports via a CT600 form).
The quicker it takes your accountant to complete your self assessment, the lower the fees they charge.
For taxpayers completing a self assessment form, keep your financial records up to date
During the normal course of running your business, please keep as much paperwork related to invoicing, payment, and expenditure as possible and enter them onto your bookkeeping package as soon as possible.
With many online bookkeeping packages, you can actually photograph these documents and store them next to the correct accounting transaction making record keeping much easier..
If you only use your bookkeeping software once a month, it becomes a lot harder to reconcile your bank account and to match payments out to actual invoices and receipts. That's because it's harder to remember what specific invoices and receipts were for the further back in time a transaction took place.
Leave it much longer and the likelihood of making significant errors on your tax return if you fill it in increases.
Uploading and categorising invoices and receipts
When you upload invoices or receipts you've received in the course of business, you should try to categorise those invoices or receipts correctly in your bookkeeping software. This will greatly help you correctly claim back the allowable expenses you've incurred to reduce the level of your tax liability.
There are a lot of business-related expenses that you can claim back – see this page from the Government's website for a breakdown.
However, with some expenses claims, its allowability may be subject to interpretation – you may end up claiming back invoices and receipts that your accountant would not have claimed back.
The situation is further complicated when you use some goods (like a laptop) both for personal and business reasons. Claiming on IT equipment can be complicated as can, if you are a residential landlord, understanding the interpretation of capital expenditure versus revenue expenditure and how to account for it.
Deeper down the tax rabbit hole
So that this articles avoids further complexity, we won't mention the tax treatment of buying a car, accounting on a cash basis, the trading allowance, or your Annual Investment Allowance.
Filling in a self assessment form is certainly something you can do yourself however please do approach it on the basis that you are likely to make mistakes when doing so.
This means that you may end up underpaying what you owe (leading to penalties and fines) or overpaying what you owe (it can be difficult to be refunded on overpaid tax the longer it goes undiscovered).
The opportunity cost in completing and submitting your own self assessment
What is an opportunity cost? In its simplest form, the definition of an opportunity cost is the cost of choosing one course of action over another.
Even if you update your online bookkeeping software daily, you should expect to spend at least a day working on your self assessment form and perhaps another day checking it over to make sure that it's as accurate as you can possibly make it.
That's two days. If you turn,over an average of £100,000 a year and you're responsible for some or all of that turnover is dependent on your personal skills, those two days spent on your self-assessment instead of being out there selling and keeping customers happy attracts an opportunity cost of £800 to you (assuming a five day working week).
It may actually be more – particularly if you operate the type of business where customers deliver revenue over the longer term than via a one-off invoice.
And do you need the hassle? Can you really be bothered? Wouldn't it be better to leave self assessment in the safe hands of a professional?
Especially when Sunny Accountants offer a starter service for just £249 + VAT – click here for details.
Paying the lowest possible level of tax working with an accountant
Accountants do lots of self assessments for their valued clients – as you'd expect. Sunny Accounting is a busy practice with over 700 clients and counting and the vast majority of clients ask us to complete and submit self assessments on their behalves.
The best way to save as much tax and extract as much value by using accountant as possible is:
Keep your bookkeeping software up to date
Not only does it minimise the amount of time your accountant needs to spend on accurately completing your self assessment, it means that there is no last-minute rush to gather all your invoices and receipts together close to the deadline.
This makes for much more precise accounting and a tax bill that may be significantly lower because of the validity of the figures (and subsequent allotment to the correct expenses category) used in the calculation.
Consult on higher-than-average expenditure closer to the end of the year
This is more for sole traders and partnerships rather than limited companies but you should consult with your accountant to make the most of your Annual Investment Allowance.
If you are considering major investments in plant, machinery, and certain other specified types of expenditure, you may benefit from splitting up the investment into two personal tax years instead of booking all of the spending in just one year.
Let your accountant know in advance as much as you possibly can about your investment plans and book an appointment to see them.
Help with your self-assessment
Working with an accountant on your self-assessment is particularly useful if:
- you are time-starved,
- you don't have or want a greater understanding of the nuances of allowable expenditure,
- you have complex tax and financial affairs, and/or
- you need help getting your financial records up to the level required by HMRC.
To speak with a Sunny representative about the advantages of having an accountant complete your self-assessment for you, please call us on 01623 559 362 or email us on [email protected] for professional tax advice and guidance.
For a free chat on how we can help you, please complete the contact form below and we will be in touch.