Why do you need to know How to complete your self-assessment return 21-22 ?

Well, are you self-employed or run a small business?  If so, you'll need to submit a tax return to HMRC for the financial year 21-22.

This can seem daunting, but with careful preparation, it doesn't have to be difficult.  In this blog post, we'll outline the steps you need to take to ensure your return is filed correctly and on time.  We'll also cover some of the common deductions and allowances that may apply to you.  So, whether you're a seasoned pro or preparing your first tax return, read on for our top tips!

"A fine is a tax for doing something wrong. A tax is a fine for doing something right." - Anonymous

How to prepare your How to complete your self-assessment return tax return 21-22 may not get the pulse racing.

For some it may cause anxiety, apoplexy and poking eyes with sticks may come to mind.

If you are you one of the 10.2 million + people that have to complete a self-assessment personal tax return it’s a necessary evil. Maybe evil is too strong a word, but that’s how it feel to many.

If you've not yet submitted yours and want an estimate of what to pay then check out my FREE online tax calculator  

Relax and sort your tax,

Online Calculators

As a business owner, you're constantly dealing with numbers. Whether you're crunching the numbers on what to charge or trying to figure out how much tax to pay,  using a business calculator makes the process easier. Check out our resource page and take away some of the number heavy lifting.

Conclusion

There you have it. Four key things that you need to know in order to prepare your personal tax return for 21/22.  Check out one of out previous blog on this topic, more words, and details.

It’s important to bear in mind that these are just the basics and that you should always seek professional advice if you’re unsure about anything. You can find more information on our website, including a free online tax calculator which will help make the process a little bit easier.

Are you ready to have an easier and more rewarding relationship with your numbers?  My book, I Hate Numbers helps you get there.

This book will show you how to have a rewarding, productive relationship with numbers and your business.  Furthermore, my book will help with that battle between the ears, that all business owners experience.  Learn more and buy my book today!

Get in touch with us to help make your life easier and stress-free. Contact us if you need help figuring out and sorting your numbers, creating your future financial story plans, your tax , payroll and other accounting and business matters.

Thanks for listening!

Completing your tax return may not be on your agenda of the top most things you want to do in your life. However, if you're amongst the 10.2 million people who need to do one, it becomes a real necessity. In this week's episode on I Hate Numbers, I'm going to go through who needs to actually complete a tax return in the United Kingdom, some of the key information that's needed to be able to complete the return, what businesses can claim for and the key dates and paying the tax. And also what happens if you can't pay the tax that's due.

You're listening to the I Hate Numbers podcast with Mahmood Reza. The I Hate Numbers Podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks! Welcome to another weekly episode with your host, Mahmood Reza. I'm an accountant, I'm an educator and a proud author of the book I Hate Numbers. Don't be deceived by that title. That title gives you an insight into the world of self-employment running your own business, covering things that are number based as well as dealing with clients, planning, what goes on between your ears. My mission in life has always been to help businesses grow, sustain, make more profit, and have the businesses they deserve. Let's crack on with the podcast.

Now, completing a tax return can be a wait until later, possibly stressful and possibly a very time consuming affair. The sooner you get your tax return done means that you can sit back, relax, you know exactly what you're going to have to pay. You've got that stress out of the way and you can just get on with your business and your life. Now, for myself, we've already been submitting tax returns on behalf of our clients and I've taken a break from that schedule to give you some insight into what goes on into the world of self assessment. You may be very familiar with the world of self assessment and there's no harm in actually just topping up your knowledge bank.

Now, I'm going to be focusing on the tax returns for the year 21/22, and that runs between the 6 April 2021 and the 5 April 2022. Now, the self assessment tax return covers the income for an individual as well as what's called capital gain transactions. Income typically involves business profits, salaries, benefits in kind, rental income and dividends. The first area I wish to cover is who actually needs to bother.

Now, the main situations where a tax return is required is if the following is applicable during the year 21/22, if you are self employed or what might be called a sole trader earning more than £1000 worth of fees or sales, then you've got to complete a return. If you are what's called a higher paid employee, this is where your income is approximately an excess of £50,000 and you've got untaxed income maybe you've got some dividends that you've got from investments, then that applies. If you're a company director, unless it was a not for profit organisation and you didn't receive any financial benefits, typically you've got to complete a tax return.

Now, if your only income from the company, by the way, was PAYE and it's below the higher rate tax bracket, then you don't have to complete a tax return. Now, if either you or your partner are receipt of child benefit and your income is over 50,000, you've got to complete a tax return. So you could both be on £49,000 a year. Fine. Nothing to do if one of you earns over 50,000, even if the other one doesn't earn anything, you've got to complete a tax return.

If you've got a business or property or you've made losses elsewhere in that business or property or capital transactions and you want to claim loss relief, complete a tax return. And lastly, if you've made any profits from capital transactions, for example, selling shares, investment properties, works of art, then you've got to complete a tax return. Now, before we dive in and start filling in the requisite boxes online or in paper form of the tax return, it's always worthwhile to think in terms of what the tax return is going to ask you to complete and also about where we gather the data.

So let's go back to the start. Now, income tax is worked out by adding up all the income you have. You then take off any costs that you may have tax release and allowances such as your personal out, and you work out what you initially owe our friends at HMRC. If some tax has already been taken off you, for example, from a salary, then effectively you're likely to be moving towards a smaller tax bill. And who knows, it might even creep to a tax refund. The tax return itself consists of two parts.

There's the main core part and there's the extra pages, which in official circles are called supplementary pages. Now, the core part of the return is where you provide personal details such as your UTR, abbreviated for unique tax reference, your name, your date of birth, and also providing details of your savings income, pension payments and gift aid claims. If you filed before folks, by the way, some of this information will already be stored for you. If it's your first time, then you have to complete that accordingly. Now the extra pages, the supplementary pages if you wish, are where you provide details about other income, not in the main core return.

Typically this is going to cover income from employment, self-employment, business partnerships, UK property income, foreign income or gains, capital gains. And also if you need to make a declaration about non-UK residency status before you start, gather together everything you need. It makes life much smoother, much less painful. If you know what you need at the beginning, it makes the process much smoother and you can get back on with your life. Now, you need to include your unique tax reference, your ten digit code provided to you when you registered with HMRC.

If you've lost it, or you haven't yet registered, then do so as quickly as possible for income from employment where you're being paid under PAYE. Then most of the information will be gathered from your P 60s, your P 11Ds, your P 45s. If you're self employed, the figures will come from your accounts, the accounts that are prepared that summarises your figures for turnover and the expenses of that business. Please note, folks, that what you put in your accounts may not necessarily be what the tax owner allows. More of that later on in this podcast.

Property income: use your rental accounts to give you the figures that you need to enter into the requisite boxes of your tax return. Now, it might be that you don't have the evidence, the backing documentation, the receipts to support what goes into your tax return. HMRC does allow you to make reasonable estimates, but don't put your finger in the air. Don't make a wild guess. Have some basis on which you've come up with those numbers. Check your bank statements, check your credit card statements. If you're looking at travel costs, look at your diary. Have something that supports the figures that's going on.

This next section, I'm going to focus now on the self-employed or sole traders or freelancers. All those collective terms are used to describe this next section. Now, if you're self employed, the tax you pay is based on the profits your business generates. The difference between what you charge your customers and what your tax allowable business expenses are. There is a general rule that says any cost that you claim for business purposes must be, wait for it, wholly and exclusively for the purpose of business. So, if you're feeling stressed out in your business and you go for a trip to Disney, that's perfectly understandable, perfectly a good thing. Who doesn't like Disney? But it's not a business deduction.

If you travel to see a client, any costs in relation to seeing that client are for business purposes, and that's perfectly fine, then you might get something that's in the middle. So, shared expenses, that's where you are spending money. But the purpose of that spend is both for business and for personal. Think about your mobile phone. You'll make personal calls as well as using it to talk to clients and running your business. Computers will be the same. You've got a computer, you use that for business purposes, but you also might use it for personal reasons, for gaming, for checking the internet and the like.

Now, by concession, HMRC allows the self-employed to claim a business proportion to work out how much of that spend relates to your business activities and how much relates to personal. Apologies here, folks, by the way, as a flag up, this does not apply to companies. Now, the costs of running your business may include things like capital purchases. So think about the PCs, the values that you might use to deliver goods, equipment that you buy, furniture, all of those support your business and help you do what you do. But we've got a completely different set of rules for working out what you can claim on those items compared to preparing the accounts.

You have to tap into something called the capital allowances rules. Entertaining clients and suppliers, however important they might be, however commercially sensible it is, is not allowed for tax purposes. If you have staff on the payroll and you want to entertain them, and I don't mean doing a juggling act, but perhaps the Christmas dinner, the summer barbecue, then that's fine, as long as it doesn't exceed a certain level. There is a regime HMRC have implemented called a simplified expenses regime. Let's roll back. Now, it may be your recordkeeping is not that brilliant. It may be that you can't be bothered to add up bits of paper. And what HMRC say is as long as you are below the VAT registration limit, then you have a choice of claiming certain expenses either based on the actual costs or using what's called scale rates, commonly known as simplified regime.

And this only applies to sole traders and partnerships. Limited companies, folks, unfortunately cannot use this regime. The two key areas that are likely to impact for a sole trader, a self-employed person, are transportation and for working from home. Now, if you do use a car, a van, a push bike or a motorbike for business, then you can claim a mileage rate instead of looking at the actual costs of running the vehicle and working out the business element. Now, if it’s a car or a van, it's 45 pence for each business mile travelled up to the first 10,000 and then after that it's 25 pence per mile. If it's a motorbike or motorcycle, you can claim 24 pence per business mile travelled. And if you're on a push bike you want to keep healthy and fit and use that to go and visit clients or go on behalf of your business, then it's 20 pence per mile. Make sure you've got some way of keeping the records of those mileages.

Now, as a heads up on this, folks, once you make that choice whether to claim mileage or the actual cost of running the vehicle, you can't change it on the car until you come to sell it again. So if you choose mileage one year, you can't chop and change the following year to do something else. Stick to mileage or stick to actual costs adjusted. The last one on the simplified regime is skill rates based on working from home. Now, you've got two choices. You either work it out on the basis of number of hours you're working on or in your business, and it goes from 25 to 50 hours per month.

You can claim a flat, £10 per month, no receipts necessary. If you work much longer, you would do 101 hours at home, then you can claim £26 per month. The alternative is to look at the cost of running the household, things like council tax, electricity, gas and the like. Look at how much that is consumed for the space that you occupy and that's your options on, and I'll finish and conclude with key dates and the payments of tax or not, as the case may be. Now, if you need to complete a tax return, you must register with HMRC by the 5 October in your second business tax year. Paper returns by then are still allowed. You can still use paper tax returns, but for the 21/22 year you've got to submit them by the 31 October 22.

If you have an exemption, by the way, say, on religious grounds for not dealing with the internet, not finding things electronically and digitally, HMRC will allow you to submit still by paper. The deadline, by the way, for getting your 21/22 tax return in is the 31st January 2023. Now, if you do end up owing tax and you've also perhaps got a PAYE job, then any tax you are up to £3000 can be collected via PAYE. You've got to get your return in though, by the 30 December 2022. HMRC will collect that money via your tax code. Now, it's an all or nothing. You can't have 3300 and the first 3000 will be collected. If it's below £3000, all of it can be collected if you so desire.

Now, any tax that you do owe for 21/22 plus premiums on account are going to be paid by the 31 January 2023. If you think there's a lot of information to absorb here, folks, there will be a link in the show notes. And if you can want to check out and check the rules and the details here, they'll be there for your pleasure. Now, it sometimes happens that you may not be out before the taxes due. Maybe it's come unexpectedly, maybe you haven't quite saved enough money to pay for your tax bill. So what do you do? Well, what you must not do is impersonate an ostrich. Do not put your head under the duvet. Do not stick your head in the sand. Don't delay.

Get that tax return in first of all. Once that's in there, then you've got options. There are always options to whatever you do. You can ring up HMRC. You can negotiate a time to pay. My experience suggests that you can typically quite easily go anything from six to twelve months without any major problem. HMRC will ask questions of you just to make sure there is an affordability issue. They will normally expect you to pay that by a monthly standing order commitment. You can do all this online, by the way, if you'd rather not talk to HMRC, which obviously seems quite a shame. But if you don't want to talk to them, you can do it all electronically and you can do it all online.

If you stick ahead in the sand and don't bother, you don't engage with HMRC, then watch out for warning letters as well as debt collectors on your pace. If you want to have a quick peek and have an estimate, you haven't quite got round to doing your tax return, check out the show notes, by the way. And there's a link to a free online tax calculator where you can put the numbers in by use of a slider. And hey, presto, the magic figures will appear. Now folks, this is part one of part two. In the next podcast, we're going to be talking more specifically about a self-employed tax return.

What goes in there, some of the key things are explained and just like having a face radio, talking about numbers over audio can be quite an interesting experience. I hope you've got some use out of this podcast. I'd love it if you left a comment, subscribe, tell your friends, tell your family, tell people you don't even like, there's this wonderful podcast called I Hate Numbers. If there's something you want to have covered on a future show, drop me a line, I'll have a look at it. And who knows, it could be in my content plan. But until then, folks, happy tax returning.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.