Self-employed Tax Return
Contents
Deductible Expenses
Non Deductible Expenses
Gather Financial Records
Completing the Tax Return
Completing a self-employed tax return can seem intimidating, but it's actually a fairly straightforward process if you know what to do.
You must decide which method you want to file your self-employed tax return to work out your filing deadline. You can sign up for HMRC email reminders to alert you to upcoming deadlines and helpful tips about self-employment.
Deductible Expenses
Deductible Expenses
Many business expenses are considered deductible for tax purposes, as long as they are incurred "wholly and exclusively" for the purpose of your business. Here are some examples of business expenses that are typically considered deductible:
Rent: Rent for business premises, such as an office or storage space.
Utilities: Gas, electricity, water, and other utility bills for business premises.
Equipment and supplies: Purchases of equipment, supplies, and materials used in your business, such as computers, phones, office furniture, and stationery.
Advertising and marketing: Costs of advertising, such as online ads, flyers, and business cards.
Professional fees: Fees for legal, accounting, or other professional services.
Travel expenses: Costs of travel for business purposes, such as train or plane tickets, or fuel for business-related car trips.
Staff costs: Salaries and wages paid to employees, National Insurance contributions, and pension contributions.
Training and development: Costs of training and development for you or your employees.
Insurance: Business insurance premiums, such as liability insurance and insurance for business equipment.
These are just some examples of business expenses that are typically considered deductible for tax purposes. However, it's important to note that some expenses may be subject to restrictions or limitations, so it's always a good idea to consult with a tax professional or accountant to determine what expenses are deductible for your specific business.
Non Deductible Expenses
Non Deductible Expenses
While many business expenses are considered deductible for tax purposes in the UK, there are also some expenses that are considered non-deductible. Here are some examples of business expenses that are typically considered non-deductible:
Capital expenditures: Expenditures that are considered capital in nature, such as the purchase of business assets like land, buildings, or machinery. These expenditures are not deductible in the year they are incurred, but instead may be deductible over a number of years through depreciation.
Personal expenses: Expenses that are not related to your business, such as personal travel, meals, or entertainment.
Fines and penalties: Any fines or penalties imposed by a government agency or regulatory body are not deductible for tax purposes.
Personal entertainment: The cost of entertaining clients or employees, such as tickets to events or meals at restaurants, is only 50% deductible for tax purposes.
Personal expenses of directors: Any expenses incurred by directors of a company that are not directly related to the business are not deductible for tax purposes.
Borrowing costs: Interest and other borrowing costs are generally not deductible, although there are some exceptions, such as interest on loans used to finance business purchases.
Political donations: Donations to political parties or candidates are not deductible for tax purposes.
Legal fees for tax disputes: Legal fees incurred in connection with tax disputes or penalties are not deductible for tax purposes.
These are just some examples of business expenses that are typically considered non-deductible for tax purposes in the UK. It's important to keep detailed records of all your business expenses and consult with a tax professional or accountant to determine what expenses are deductible for your specific business.
Gather Financial Records
Gather Financial Records
When completing your self-employed tax return, you'll need to provide a record of your income and expenses to determine your taxable income. Here are some of the financial records you should gather to help you complete your Self Assessment tax return:
Invoices: Keep all invoices that show the money you've earned from your self-employed business.
Receipts: Keep all receipts that show the money you've spent on business-related expenses, such as supplies, rent, utilities, and advertising.
Bank statements: Keep all bank statements that show your business income and expenses, as well as any transfers between your business and personal accounts.
Mileage log: If you use your personal vehicle for business purposes, keep a record of the miles you've driven and the purpose of each trip. This will help you calculate your allowable mileage expenses.
Cash book: Keep a record of all cash transactions, including sales, expenses, and other cash payments.
Books and records: Keep detailed records of all your business transactions, including sales, expenses, and tax payments.
By keeping these financial records, you'll be able to accurately report your income and expenses on your Self Assessment tax return. It's also a good idea to keep these records organised and up-to-date throughout the year, so that you're ready to file your tax return when the deadline arrives.
Completing the Tax Return
Completing the Tax Return
Completing a self-employed tax return can seem intimidating, but it's actually a fairly straightforward process if you know what to do. Here's a simple guide to help you complete your self-employed tax return:
Gather your financial records: Collect all of your financial records, including invoices, receipts, bank statements, and any other records that show your income and expenses.
Determine your taxable income: Calculate your total income for the tax year and subtract any allowable expenses to determine your taxable income.
Determine your expenses: Make a list of all of your expenses, including those related to your business, such as supplies, rent, utilities, and advertising.
Choose the right form: You'll need to complete a Self Assessment tax return to report your self-employed income.
Complete the form: Fill in all of the required information on the form, including your name, address, National Insurance number, and business information. Then, fill in the information about your income and expenses.
Register for Self Assessment: If you haven't already, you'll need to register for Self Assessment with HM Revenue and Customs (HMRC). You can sign in here. You can also use a paper assessment form .
Calculate your taxes owed: Use the information you provided on the form to calculate your taxes owed. If you owe taxes, you'll need to make a payment by the tax deadline.
File the return: Submit your completed Self Assessment tax return to HMRC by the tax deadline, either online or by mail.
Deadlines: For paper returns, the deadline is Midnight on 31 October in the same the filing tax year (5 April). For online returns, the deadline is 31 January in the following year from the filing tax year (5 April).
By following these steps, you should be able to complete your self-employed tax return with ease. If you have any questions or concerns, it's always a good idea to consult with a tax professional or an accountant.