Tax Return: The last step in running your own business
Here we go again...
Currently, completing a tax return every year is seen to be THE ‘bane of self-employed life.' Yes it's a little intimidating, No we're not prepared for it in college. But dammit we're going to tackle it like we do an audition. Confident and fearless! But, “Why would I be confident and fearless when I don't know what I'm doing?' we hear you ask. Well… after a very clueless Jo called her mum like 50 times for help the first time she did hers, clearly, something (anything!!) had to be done! And, although we all love a catch up, we've made this step-by-step, screenshot guide so we can all be “strong, independant performers.' You don't have to know exactly what you're doing… we've practically already done it for you! (Particularly if you use SansDrama Online App).
Good to know in advance... The actual tax return form on HMRC is used by ALL self-employed people and obviously we want to keep it as specific to our lovely breed as possible. So DO NOT BE WORRIED if we say “this probably won't apply to you' because the form has to cover everyone's situation, not just ours. We'll let you know, as best we can, if something crops up that is likely to differ amongst performers and try to explain it so you can figure out if it does apply or not! But aside from that, we've used Jo's tax return as a template (because yours will probably be pretty darn similar) so follow our lead! And don't forget that you can contact us at any time.
Whoa whoa whoa Mr. Postman
You should have received a letter from HMRC telling you that it is time to do your tax return (this will have been sent to the address that your registered to HMRC through). You can complete a paper tax return and the letter tells you how to, but most people go for online - that's what we've gone for here.
Like in our guide for registering as self-employed, we think the easiest way to tackle filing your tax return is to keep this article open in one tab and then open up another for your tax return - then you can go through with the two side-by-side. Sooooo when you're ready click this link... www.tax.service.gov.uk/gg/sign-in.
What's my password again…?
Link opened in new tab? Does it look the same as the screenshot below? Great! We're on the right path! You'll see that it's time to log in. Now, this is where Jo has faffed around endlessly. To save yourself the stress, pleeeease keep your Government Gateway user id and password (you got this when you first registered as self-employed) safe (and in a place where you know where to find it! - Jo's problem :-/ ). If you don't have them you'll be directed through security checks which is annoying, but isn't the end of the world (Jo found the ‘secureidentity' app a good, quick option here). So… log in details at hand, sign in.
Setting up security
Just HMRC protecting your account. You can get text or emailed an access code or you can go through a verification process via one of the HMRC security apps. They're all pretty straight forward but text is what we use - see screenshots below. You'll notice we ticked “remember this access code for 7 days'- handy if you want to log back into your account during the next week. Remember, you don't have to fill in your tax return form all in one go - you can log back in and do a bit more whenever you like.
You have the option to set up a ‘security backup' here. You'll be presented with similar options again but you can choose to skip this.
On the next page, If you want someone else to have access to your account, here's your opportunity to set it up. Neither of us bothered with this (see screenshot below selecting ‘no - I'm the only user') but it's totally up to you ofcourse.
Once you've sorted out the security faff, you'll be taken to your ‘tax homepage' - oh the joy! In true SansDrama fashion, we suggest that you take this opportunity to get the kettle on, make a cup of tea and grab whatever biscuity goodness you fancy. When you're ready, click Complete Self Assessment return - curtains up, it's showtime!
This screen is just checking that you're here to do your self-assessment tax return. You can just scroll down and click Start.
1. Information we hold about you
Usually, you'll now see this screen, but not always (Jo saw it, but it didn't show on James' return). It just sets out the employers that HMRC thinks you've had last tax year for EMPLOYED work (i.e. not self-employed). You can't actually make any edits to this, it's just here for information, so you may as well just scroll down and click Next. Remember to click the little box confirming that you've viewed this page.
2. Tell us about you
Feel like you've got this info covered but if you've got any questions/problems, just give us a shout! Or you can always use the question marks on the page for more info too. If you're unsure about your ‘taxpayer status,' it should be ‘UK.'
3. Tailor your return
Here, you tell HMRC what kind of income you've had throughout the tax year. Let's start with Page 1 of 3. If you have done employed work (the type where you get payslips and a P45/P60), then you need to answer 'Yes' to the first question. Then how many employers you've had. It will usually, but not always, have a list of these employers already below - (this relates back to the ‘Information we hold about you' section earlier. If they don't show, then you just put them in yourself. Remember this is for EMPLOYED work only. If you've only done self-employed work, select ‘no' and move on.
The rest of the questions on this page are for SELF-EMPLOYED work only. Check out your records to see if your self-employed income is collectively greater than £1,000 for the tax year (the SansDrama Online App tells you this on the tax return summary page -Yup you can thank us anytime!) Assuming you guys have been busy bees and selected Yes you are now asked how many ‘self-employed businesses' you have and what those businesses are called. Now, unless you know otherwise, you'll be the same as Jo and just have 1 and it'll be called whatever you named it when you first registered as self-employed. Most theatre folk use their stage name ie. ‘Jo Bird' - if you followed our registration tutorial, you'll probs be the same. The other questions don't really relate to us (except if you've earnt any foreign income from working abroad) so select ‘no' as Jo has in the screenshots below. FFYI - We're going to do an article on earning money abroad/cruise ships, but in the meantime if you're unsure, you can always use the question marks for more info or again… get in contact.Next.
In Page 2 of 3 you're asked about whether or not you have any other types of income - Select 'Yes' if it applies to you and 'No' if not. However, like Jo you'll probably be ‘yes' for the first question regarding interest (if you have a bank account which you earn interest on -even if it's a tiny amount) and ‘no' for everything else. If you're unsure, use the question marks or contact yours truly :-)
Cool - onto Page 3 of 3. You're doing great! Same thing again answering ‘yes' or ‘no.' Again, you'll probably be ‘no's' for these like Jo (see below), but here's a little dropdown for the most likely things that you might be a ‘yes' for. Next.
- Personal pension or retirement annuity (contribution)
- If you are being a responsible egg and contributing to a pension plan, then it may benefit you to disclose it here. Note: this only counts if you make the contribution after you have been taxed on it, so it doesn't count if you make the contribution through your payroll as it will go into your pension before it has been taxed. *Tip* - Equity has a pension plan, so if you aren't already making contributions to a pension, maybe you should look into this??
- Married couple's allowance
- Our tax system is currently a bit socially weird in that it's currently ‘tax-efficient' to be married - so if you were looking for an excuse to tie the knot - this could be it! If you are married, you may already be taking advantage of this (select 'Yes') or it may be worth you looking into this!
- Tax advisor
- Booooo. You don't need one of these, that's why you're here. DIY tax returns!
- Acting on behalf of someone else
- You only select 'Yes' here if you are filling in this tax return for someone else - probably no?
4. Fill in your return
Nailed it - so this next section (your actual ‘tax return') has now been ‘tailored' to YOU and on the next screen (see below), you'll see all the different sections that need completing. We promise this looks more intimidating then it actually is. Just take a breath… how are those biscuits going?
So how does this next bit work? See how the ‘Tell us about you' and ‘Tailor your return' sections have green ticks next to them? That's what we want to be seeing!! We're going to turn those blue arrows on the other sections into green ticks - itching with excitement? Thought so! EMPLOYED INCOME FIRST. (If you've only done self-employed work in the tax year you can skip this bit). For each employer you've had this year, there will be 2 pages: ‘Enter income'; and ‘Enter additional information'. See below:
Click Enter income on your first employer and the following page should pop up (screenshot below). The page title will still be 4. Fill in your return and it should be pre-filled with the Employer name, Employer's PAYE Reference, and the amount that HMRC thinks you have been paid and taxed by them. You should agree this back to your records for that employer (the SansDrama Online App sets this out in your tax return summary). *Tip* Remember that all employers should have provided you with either a P45 or P60 that you can use to match it up with.
Focusing on the asterix questions (that HAVE to be filled out) you need to confirm if you were a director of this company (probably a 'no') and whether you have received any taxable benefits from the employer (probably a ‘no' too). The final question you have to answer is whether you wish to claim any employment expenses or capital allowances while working for this employer (again, probably a ‘no') but if you aren't sure you know what to do ask us plus don't forget you can use the question marks for more detail!
We've not mentioned that you should technically disclose any tips you make at work on this page, too. Similarly, we won't talk about the Repayment of Teachers' Loan Scheme bit as it probably doesn't apply so leave it blank.Next!
We've never found it useful to add anything in here on the ‘Enter additional income' page so we've just left it blank, but we're keen to hear if you have. Let us know as it could be helpful for others! Have a dunk of your biscuit, eat, dunk again, finish biscuit and click Next, repeat the above until all employers have been filled out.
Nice. Employed income has been dealt with. Go you!! Let's move on to SELF-EMPLOYED income! The next page asks whether your self-employed business had income of over £85,000 this year (I mean...we can all dream!). If you did, congrats! And….maybe drop us an email or contact an accountant at this point because you should be VAT registered. For the rest of us mere mortals, select ‘No'.
This gives you a load of ‘special circumstances' that a self-employed person may be operating under. We've had a look at these and can't see any that would obviously apply to us performers. By all means review them too for anything that might apply to you, but if they don't, click in the box None of these apply at the very bottom and then click Next.
The second page gets you to confirm the name of your business (again, Jo uses Jo Bird) and the description of the work you do (Jo uses performer). The next 4 questions are not required, but you can answer if relevant for you (probably not). Next!
Okay, unless you have a good reason to enter something different, just copy the screenshot below. You make your books/accounts up until 5th April each year (unless you know that you make them up to a specific different date) and you work on a ‘cash basis' (as explained in our article recording income). Next!
Okay - the next page is where all your efforts recording your income and expenses in the SansDrama Online App pay off. Enter the total figure of your self-employed income in the top box, you can probably leave the next two boxes blank (HMRC likes you to leave boxes blank rather than putting in zero). For expenses, select ‘as a single total value' (as shown in screenshot below) and enter your ‘Total allowable expenses' into the next box. If you want to double check what counts as an ‘allowable expense' we've got you covered on our expenses article!
We've included a little screenshot of the ‘tax return summary page' on the SansDrama Online App so you can see how easy it is to transfer your information from app to tax return form. When we sasy we've got you covered - we mean it!
Still relating to SELF-EMPLOYED work ONLY - the next 4 pages (see screenshots below) don't really apply to us. If you're only source of SELF-EMPLOYED income is performance and other self-employed side jobs you'll be the same as Jo and can leave the boxes blank and click the Next button. However, it's always worth reading them yourself to be sure. If you really think they relate to you, let us know.
That's the end of inputting income!! See the percentage of completion shoot up at the top of your screen? Satisfying right?
The next page is about Class 4 NICs (ie. National Insurance Contributions) - a tax paid as a percentage of your profits for the year. You only have to pay Class 4 NIC if your profits (income minus expenses) are over a certain amount - currently (£8,424). Moving on, it's probably a No to the question ‘Are you exempt from paying Class 4 NICs?' The page gives you the 5 reasons why you may be exempt. Give these a read and see if they apply - probably not! The only one which may apply to us performers is if you've been working abroad and are NOT considered a resident of the UK for tax purposes for that tax year.
Is you're teapot nearly empty? Because we're so close to completion now. (Feels like we're not because we're on number 4, but we actually are!) Next page is more ‘additional information' - again, we never put anything in here so unless you're bursting to tell HMRC something, leave blank….and Next.
If you have more than one self-employed business, you need to go through the self-employed pages again for the other(s). Click here and go back to to the instructions for this. If not, enjoy this little summary page where you literally don't have to do anything! Winning! Just click Next. Maybe you can check out your profits first….
We've covered Class 4 NICs. Up next is Class 2 NICs which is similar, but instead of paying a percentage of your profit, you pay £2.95 for each week that you are self-employed. Like Class 4 NICs, if you earn under a certain amount (currently £6,205), you don't have to pay this but on this page (see screenshot), you're given the option to pay NICs voluntarily even if your profit is below the threshold. ‘What?! Why would I do that?!!?' I hear you ask… well, paying this impacts your eligibility to receive certain benefits including your statutory pension (the one from the government). Frankly, it would be a bit of a bore to explain this in detail right now, but this site gives a pretty good summary for why you may want to contibute voluntarily: Low Incomes Tax Reform Group: What National Insurance do I pay if I am self-employed?
Our view is, if you can afford it, then do it. But, obviously don't go hungry - prioritise food (biscuits) over this contribution! If you have earnt over the threshold, HMRC will work out the amount you owe (like in screenshot below) and display it here. No choice for you I'm afraid!
If earlier, like Jo, you selected that you get interest from a bank account (the majority of you), this page will now show -UK Interest. Ideally, you can add up any interest payments you've received throughout the tax year from your bank account(s) and put the amount in. But given you're unlikely to pay tax on this number, it's okay to make a good estimate. For example, if your bank account pays 1% interest and you've had about £1,000 in there all tax year, you will have received £10 of interest. (We've never used them but you'll see that HMRC provide an ‘interest worksheet' to help you calculate this figure - if you give it a go, let us know how you get on!) Most bank accounts will pay you interest ‘Untaxed' - called ‘Gross Interest' on your bank statement - so probably pop your interest in here (second box) and leave the other two boxes blank as shown in the image below.Next.
The next page tells you if HMRC thinks you have underpaid tax in previous tax years, that you still owe them for. (This happens when you try to use your tax code to pay tax you owed in previous tax years, but haven't earned enough through employed work to cover the balance). HMRC probably has this right, so you can say ‘Yes' unless you are sure they have it wrong. Note: if you have only ever done self-employed work or have always paid any tax you owed, you'd expect to see £0.00 here. Sip your tea and click Next.
Literally the same but for the tax year you are currently completing. Again, HMRC is pretty good at getting this right, so click ‘Yes', gulp your tea and then click Next.
Unless you know otherwise, it's probably the same again… pop a zero in the box and finish the bloomin' tea. Click Next!
You've heard of a ‘tax rebate' right!? You'll get your full calculation later on but if you've overpaid on tax throughout the year, here's your opportunity to make sure you'll be getting it back! Just make sure you select Yourself on this page (see below)... unless you want to give it to someone else? Donations are always welcome towards our biscuit tin… just saying...
The next page deals with underpayment of tax. To the first question, HMRC are asking if you want to pay any tax you may now or if you would prefer to have it taken out throughout the next tax year via your employed job - they'll do this by changing your ‘tax code.' If you are going to be employed this next tax year, it makes sense to select ‘Yes' here, like Jo. If you're NOT going to be doing employed work for the next tax year, select NO.The second question relates to additional income you are expecting in the next year that you want to build into your tax code - it's a bit niche, so if you are unsure, just select ‘No' for this.Next!
This is another page you can probably leave blank (unless you know of a specific reason why not) and just click Next.
This Any other information (Page 1 of 2) page asks whether any of your numbers are provisional or estimated. Since we work on a ‘cash basis,' provisional seems unlikely. Technically, you may have estimated your interest received, but likely you can just say ‘No' here and click next.
Another ‘any other info' type page to finish this section - we expect you'll want to leave the box blank and select ‘No' in the drop down. Next
5. View Your CalculationSuccess! Recognise this summary page? Run down it and make sure you've got a lovely line of green ticks, then click Next. Most importantly!! - Check that the stuff in the green box at the top is correct - if that's wrong then you won't have been given the right boxes to fill out in your return. Remember you can contact us if you're struggling!
6. View your calculation
Time to find out whether you are owed a tax rebate OR if you owe tax to HMRC. Fingers crossed for a rebate ey! You can download your full return using the ‘View and print your full calculation' link (you should do this anyway to keep a copy for your records), then click Next...
...and see a full breakdown summary of the calculation of your tax situation. Now, If any of these numbers look odd, you may need to go back to the relevant bit of your tax return and update. Again, there is a ‘Print your full calculation' button at the bottom before you click Next.
7. Save Your Return
Follow the next 3 screens through, double checking everything and clicking next. If you haven't printed it already, ensure that you save it at the very least (Jo saves and prints!!).
It's always easy to be Captain Hindsight about these things, but if you are getting a nasty shock at this stage, have a think about how you are keeping track of your finances/tax situation throughout the year. Use any method you want, if it works for you, great. We are shameless advocates of the SansDrama Online App - we've specifically added the function to see how your tax situation is going at any point in the year. Then you're ahead of the game and, if necessary, you can set aside any cash you might need to pay your tax bill next time round. Little screenshot example below for you…
8. Submit your Return
Finally!! You'll see this page (below) that has all the information you're submitting to HMRC and it asks you to confirm that everything you have supplied is ‘correct and complete to the best of my knowledge and belief'. Tick the box and *Que rousing chorus of gospel singers* OH HAPPY DAY!! Click SUBMIT.
GO, RUN, DANCE, BELT AND BE MERRY!!
Has this helped you at all? We bloomin' hope so! - let us know or give us a shout out somewhere! If we missed anything or it still isn't clear from what we've said then we want to know! This is
See you soon! Love Jo and James x