With the self assessment deadline for the 2021-2022 online tax return for self-employed workers fast approaching – falling on January 31st 2023 – and as the cost-of-living crisis continues into the new year, British taxpayers are being encouraged to act early in order to ensure they save money and avoid penalties for late submissions. Economists have forecasted that the UK is likely to be in a deep recession through all of 2023 and likely will be the worst performing country in the G7. Proprietary data from Tommys Tax, the UK’s leading tax-refund app, revealed that 50% of Brits state that the cost-of-living crisis is crippling their personal finances – and believe that any kind of refund would be a lifesaver at the moment. In light of this, Tommy Mcnally, tax expert and CEO of Tommys Tax, has provided a checklist for outlining the things that self-employed workers, who may be unsure about where to start when processing their return, need to have in place.
Use the trading allowance for self-employed expenses:
You can claim a flat £1000 for self-employed expenses using the trading allowance – if you do so, you won’t need to keep your business receipts. The alternative is that you can claim every single business expense if your expenses supersede £1000 annually. If this is the case, you will need to keep all your receipts (or bank statements can also work) – it’s important to note that you can’t do both.
Make sure you have all the information needed for your tax return:
For self-assessment workers, the key information needed includes your income and expenditure details, meaning you must have all invoices and receipts in hand. It’s critical that you keep all your records throughout the year, as HMRC may check your return after you’ve filed, asking to see your records. You’re also required to keep your records for five years after the January 31 deadline.
You will most likely need the following details: employment income, dividends, partnership income, interest, rental income, foreign income, pension contributions, gift air, pension income, payment on account, P11D, capital gains, and redundancy lump payments or unemployment benefits. If you need to ask third parties such as banks and building societies for information, make sure you consider the time it takes for them to give it to you.
Claim pension tax relief:
For basic rate taxpayers, your 20% tax relief on pension contributions will be added automatically. If you’re at a higher (40%) or additional rate (45%), you will need to claim the additional 20 or 25% through your tax return. This money will not be paid directly into your pension pot – it will be repaid either through a tax rebate, a change in your tax code so you pay less next year, or a reduction in this year’s tax bill.
Pay your self-employed tax:
You must pay tax as a self-employed worker before the January 31 deadline. HMRC will calculate how much you owe, as well as the National Insurance contributions you need to pay. If you file your tax return late, you’ll get a £100 penalty if it’s up to three months late. If you still haven’t paid after this time, the penalty is much more.
Add your tax-deductible expenses:
The experts at Tommys Tax have compiled a list of 33 types of expenses you can claim back as a self-employed worker – you can find the full article here.
The average amount that can be claimed by a self-assessment worker ranges anywhere from £2000- £3000. Tommys Tax normally caps the expenses at £4500, so unless the customer is a higher earner, the refund amount will not change.
Tommy Mcnally, leading tax expert and CEO of Tommys Tax comments on the fast approaching deadline:
“In order to take the anxiety out of having to do your taxes and file your self assessment on time, it’s best to approach it as something to manage bit by bit, by breaking down each task that is relevant to you. Ahead of the fast approaching deadline, we at Tommys Tax hope that the simple tips above may help with this and make the deadline for submission a lot less daunting.
“With so much to think about as we enter the new year, what with the continuing cost-of-living crisis, as well as the current delays through HMRC, I’m sure that many people are wondering whether they’ll be able to claim their rebates back in time.
That is why we’re here to help with the entire process for workers across the country. One of the ways we help is by educating customers about the various tax rebates that people are eligible for, but don’t make use of and that is where we’re here to help. Taxes can be boring, confusing and anxiety-inducing, but if done right could make a real difference to people’s lives.”
