Can I do my self-assessment myself?

To answer the question ‘Can I do self-assessment myself?’ the key giveaway is the term ‘self’ in self-assessment. So yes, technically you definitely can!

Although -- as often with HMRC’s tax systems, support from a professional can prove to be extremely beneficial.

Only a wage?

If you’re receiving additional income other than through a wage, you will need to report this to HMRC by completing a self-assessment tax return which will be used to calculate and collect income tax.

If you are paid wages, you are automatically taxed at source through PAYE (Pay As You Earn), hence why a self-assessment is generally not required if a wage is your only source of income.

The information that you provide in your self-assessment will determine how much tax you owe, so it’s crucial to speak with a reputable tax adviser to not pay a penny less -- or a penny more, writes Keith Tully of Real Business Rescue.  

What is a self-assessment tax return?

A self-assessment tax return is an HMRC form that requires you to populate information relating to your income for the tax year it relates to.

This includes untaxed income received while in full-time, part-time, or casual employment, income received as a company director, and Covid-19 grants.

What to tick off in your self-assessment form

When filling out your self-assessment tax return, you will need to provide the following information:

• All income received, including pension payments and state benefits. You will need to complete supplementary forms for additional income, such as share schemes, gilts, stock dividends and life insurance gains.
• Tax relief, such as pension schemes and charitable giving.
• Student loan repayments.
• Allowances and benefits.
• Tax adviser (if appropriate and if you’ve not decided to do self-assessment yourself!), including the adviser’s name and address.

Given the not very straightforward information requirements above, contractors can hopefully see where support from an accountant can be invaluable. An accountant can also advise you on Capital Gains Tax (CGT), claiming expenses, and general tax treatment considerations to maximise your take-home pay as a contractor.

When should I submit a self-assessment tax return?

You’ll need to submit a tax return if you’re self-employed, a sole trader, in a partnership, or if you’re not self-employed but receive additional income, such as through rental property.

A self-assessment tax return must be submitted following the end of the tax year that it applies to.

If you fail to send your self-assessment tax return into HMRC on time, you may be charged interest or face a penalty.

However, the penalty measures have been relaxed where late payment/filing is related to Covid-19 for the 2020-2021 tax year.

There are a few exemptions where HMRC will not penalise you for filing your self-assessment late or making late payment.

So-called ‘reasonable excuses’ include the death of a partner, service issues, or software that failed before or while preparing your return. Be aware, late-filing taxpayers have tried their hand at a variety of peculiar excuses that have failed to impress HMRC, such as an untidy house and having a hungry pet!

Your self-assessment checklist

All the information that you provide in your self-assessment must be backed by evidence, where possible. Just this requirement alone is a good enough reason for some people not to attempt their self-assessment themselves, single-handedly!

Generally though, it is unlikely that HMRC will come knocking to verify every detail inputted. However, if any red flags do arise, you’ll need to provide company records to support your claims. As a company director, you need to retain company receipts and bank statements for a total of six years from the financial year that they relate to.

Another reason why self-assessing by yourself isn’t as commonplace as you might think is that self-assessors also need a basic level of technical know-how to submit their tax return. Contractors who work in technology may not be fazed by this but bear in mind, if you have an accountant or tax adviser on hand, they will typically prepare and submit your personal tax return – in addition to your company return which is usually covered in the accountant’s standard service -- for an extra fee.

But if you’re keen to settle up with HMRC without help, a self-assessment tax return can be filed online here or by using form SA100 and supplementary pages. And if you’re registering for the first time, give yourself up to 20 working days to register and submit your tax return, as advised by HMRC, because you will need to register for a UTR (Unique Taxpayer Reference) number.  

How do I pay self-assessment tax?

Still going it alone as a self-assessor?! Okay, you need to pay your self-assessment tax bill by January 31st. This can be done online and in a variety of payment methods.

If you can’t afford to pay self-assessment tax due to cash flow problems, a Time To Pay arrangement from HMRC can give you enough time to raise funds and help spread tax payments. 

Lastly, a warning…

Finally, please be aware that you must take reasonable care to avoid mistakes when preparing your tax return, as failing to do so could incur a hefty penalty. If HMRC suspects tax evasion, they’re within their power to launch an investigation into your tax affairs – another reason why turning to a seasoned professional usually makes sense, financially and otherwise.