What to look out for with self-assessment tax returns in the digital era

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Opinion

  Posted by: electime      29th November 2021

As a self-employed electrician, there are many bits of admin you have to cross off your list, including the all important tax return. However, it’s worth being aware that there are changes on the horizon revolving around tax. Emilia Carvell, Content & Support Manager of digital tax software APARI, looks at what electricians should be aware of, and how to avoid common mistakes.

What is a self-assessment tax return?

When you work for yourself, income tax isn’t automatically taken out of your wage, which is why many electricians have to fill out a self-assessment tax return – a series of forms that inform the government how much you earned so your income can be taxed appropriately. It is your personal obligation to confirm and check if the information you submit is correct.

How is Making Tax Digital for Income Tax affecting self-assessment tax returns?

If you are new to the world of self-assessment tax returns, then you have joined at an interesting time. You may have already seen the phrase Making Tax Digital (MTD) when researching self-assessment tax returns online. It is the new way to file your self-assessment tax position, although the need to self-assess and submit your tax position will not change.

There will be three big changes that come into effect when MTD comes into full force in April 2024:

  • Income tax returns will be submitted through MTD software.
  • Digital records of your tax-related income and expenditure will need to be kept in suitable MTD software.
  • Self-Assessment tax submissions will need to be made once a quarter, with a final End of Period Statement, and Annual Summary to be submitted after the end of the tax year.

Should you use software to complete your tax return?

In 90 per cent of cases, it is possible to use software for completing your self-assessment and submitting it online, making it much easier and making tax far more doable. HMRC recognised software is designed around making submitting tax returns a lot easier.

There are, however, a couple of things that software can’t yet do. Namely, you can’t register or pay through the software. Registering for a self-assessment tax return, and paying your final tax bill, must be done directly through HMRC. All you need to do is register via the HMRC website and create an account.

Working out your self-assessment tax bill

Some software – like APARI’s digital tax software – will calculate your tax bill in real time. This gives clear visibility over what you owe and when. Unless you really love spreadsheets and keep all of your financial information in excel along with your precise tax calculations, this is one of the most convenient ways to see how much tax you are likely to owe and when it should be paid.

That being said, you may not necessarily want to use software yet or you may want to calculate your own bill – in which case, there is a very simple process. Once you send in your tax return, HMRC will create a bill for you detailing how much you owe. This can be seen in the HMRC portal, under the “View Your Calculation” section before you submit your tax return. Alternatively, HMRC will send your bill to its online account system up to 72 hours after you have submitted your tax return.

There are options if you aren’t able to pay your tax bill, or if you can’t pay on time. If that is the case, you need to contact HMRC straight away to arrange an alternative.

What happens if you don’t complete your self-assessment tax return on time?

There are unfortunately penalties in place for not filing a return on time. If your return is up to three months late then there is a fee of up to £100, plus interest on any late payments. For self-assessments over three months late then the fine could be much larger.

If there is a good reason for not having filed your return, then you can always appeal any fine or penalty. Be warned: it needs to be a good excuse.

There are currently proposed penalties for late submissions once MTD comes into full effect in April 2024 – although they are not in effect just yet.

For electricians unsure about whether or not they need to fill out a self-assessment tax return, there is a great HMRC tool for finding out here.

For more advice and to find out how to make tax doable, visit the website