In Depth

Top tips for filing your self-assessment tax form

Find out what you need to declare, what your allowances are and how to cut your tax bill

There’s just over a week to go before the tax return deadline - miss it and you will face at least a £100 fine.

Here’s how to make the process of filling out your self-assessment form easier. There is also advice on what you need to declare and how to reduce your tax bill.

1. Get an online account

The deadline for filling out a paper tax return has already passed (31 October) so you will have to fill out your return online. That means you will need a log-in to the HMRC website.

If you have done this before, you will already be registered. But, if you haven’t registered before you need to do it fast. It takes up to ten working days to receive your activation code in the post and you cannot file your tax return without it.

2. Gather your paperwork

Before trying to fill out your form make sure you have all the paperwork you need to hand. This includes: a P60 form from your employer showing your income and the tax you have paid on it; a P45 if you have left a job within the tax year; a P11D or P9D detailing benefits and expenses; plus details of interest on bank or building society accounts, dividends from investments and any other income you receive.

3. Don’t call HMRC

If you want to hold on to your sanity, avoid calling the taxman. Research from the Public Accounts Committee found that HMRC answered only 50% of phone calls in the first half of 2015. Over a third of those people whose calls were answered had to wait over five minutes for someone to pick up.

Avoid that stress by looking online for the answers to your queries. HMRC’s website should be able to answer most of your questions. It has videos explaining everything from how to register to working out your expenses.

4. Use an accountant

The most stress-free way to file a tax return is to have somebody else do it for you. An accountant can deal with sifting through your paperwork and making sure nothing has been missed and you can relax knowing your taxes are in the hands of an expert.

Accountant fees usually range from £200 to £400 + VAT but in many cases they are able to make savings to your final tax bill that will go some way towards paying off their fee.

5. Learn from your mistakes

If you’ve spent hours hunting the house for essential paperwork, fretting about long-forgotten savings accounts or worrying how you are actually going to pay the final bill, take steps now to avoid the same stress next year. Put those lessons into practice now to make life easier next year.

Create a spreadsheet to detail your income and expenses and update it weekly or monthly. Keep files full of bank statements, bills and important forms so you can find them easily. Finally, open a specific savings account for your taxes and regularly deposit a portion of your income so you’ll have enough money to pay your tax bill.

That account could end up delivering an unexpected perk if there is money left over.

Do I need to fill out a tax return?

You must fill out a tax return if you are: self-employed and work alone as a sole trader; are a partner in a business, or are a company director (unless it’s an unpaid position for a non-profit organisation or charity). You also need to fill one out if you are employed and pay taxes through PAYE but earn self-employed income too.

There are other circumstances where you may have to fill out a self-assessment form. For example, if you are a higher rate taxpayer you’ll need to fill out a tax return to claim back additional tax relief on your pension contributions. If you or your partner earn more than £50,000 a year and claim child benefit you have to fill out a self-assessment form to pay some of the benefit back.

If you aren’t sure if you need to fill out a form you can check here.

What do I need to declare?

You have to report everything you’ve earned over the tax year from 6 April 2017 to 5 April 2018. This includes income from employment, self-employment, property and interest and gains on your savings and investments.

Even if all your savings and investments are in tax-free Isas you still have to declare them, despite the fact no tax should be due.

If you are self-employed or a sole trader you will have to pay Class 2 National Insurance (NI) contributions of £2.85 per week if you earned more than £6,025 in 2017/18. If you earned more than £8,164, you will also need to pay Class 4 NI contributions of 9% on profits between £8,164 and £45,000 and 2% on profits over £45,000.

Details of National Insurance contributions can be found here.

What were the tax rates for 2017/2018?

In the tax year 2017/18 most people had a personal allowance – that’s how much you can earn before income tax is due – of £11,500.

This is deducted from your total earnings for the year, which is then taxed at either the basic rate of 20% for amounts under £33,500, at 40% between £33,500 and 150,000, or 45% for earnings of more than £150,0000.

For example, if you earned £52,000 last year, you pay nothing on the first £11,500, 20% on the next £33,500, and 40% on the next £7,000.

There are some exceptions. For example, if you earn over £100,000, the standard personal allowance of £11,500 is reduced by £1 for every £2 of income.

How can I cut my bill?

There are a whole host of ways you can cut your tax bill. The main one is by claiming expenses, as businesses (even if you are just a one-man band) do not have to pay VAT on costs incurred in the day-to-day running of their operations.

If you are self-employed you can claim expenses such as a proportion of energy costs if you work from home, stationery and travel costs. You can even expense a portion of your mortgage interest in some cases.

The taxman explains what expenses you can claim and how to calculate them here.

What if I miss the deadline?

Online tax returns must be submitted by midnight on 31 January 2019.

Last year, around 750,000 people cut it fine by filing on the last day of January and a similar number missed the cut off.

Those who submit their self-assessment forms late receive an automatic £100 fine. If you’re more than three months late, you will be charged a further penalty of £10 a day for a maximum of 90 days.

This year HMRC officials have been left red-faced after some 653 people who submitted their tax returns by the start of January were hit by bogus late-payment penalty charges.

The BBC reports that, despite initial denials, tax officials admitted that some people did receive “letters telling them they’d missed the deadline and so had to pay a penalty of £100, even though many had submitted returns almost a month ahead of the 31 January deadline”.

It is also worth noting that your total tax bill for the 2017/18 year must be paid by midnight on 31 January 2019. Failure to do so will result in a £50 penalty plus 3% interest on what you owe. If you’re more than six months late, you will be charged a further £50.

As of this year, credit cards are no longer accepted, although bank transfers and debit card payments are still valid.

This online tool will help calculate how much you will need to pay in penalties and interest if you miss the deadlines.

“If you’re fined, you should receive notification of it in the post by the end of February,” says Money Saving Expert.

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